Natural gas is a great alternative energy source, and the form of energy and its exchange traded funds (ETFs) are at seven-year lows. Could this mean an uptrend is in the offing?
What makes natural gas so attractive? Gregory Davis for Investopedia states the following reasons:
- The outlook on natural gas seems optimistic. The U.S. Energy Information excepts natural gas consumption to fall 1.3% this year and rise 0.4% next year. Likewise, Henry Hub spot prices averaged $4.65/Mcf in February, are expected to hit $4.67/Mcf in 2009 and $5.87/Mcf in 2010.
- It is not a renewable form of energy, but offers the benefits of producing less sulfur, carbon and nitrogen than carbon or oil, offering a clean source of energy.
- It is susceptible to the demand shocks caused by hurricanes and a faster than expected recovery of the U.S. economy, which could lead to a surge in demand from industrials.
- Combined with oil and coal, natural gas will meet 79% of U.S. energy supply needs over the next two decades.
If you want to grab exposure to this relatively clean source of energy, wait for the uptrends to appear and take a look at the following ETFs:
- U.S. Natural Gas Fund ETF (UNG): down 22.5% year-to-date
- First Trust ISE-Revere Natural Gas ETF (FCG): down 8% year-to-date and has crossed its 50-day moving average
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.