UNG - United States Natural Gas Fund (NYSE Stock)

[Aufan 1983]

I bought in this today on the fall at 33.53. I may be wrong but this appears to be a no brainer. Energy will bounce back and with winter approaching what better time to buy at a HUGE DISCOUNT.

Check out the chart and look at what has happen each time it has fell to this level.




http://www.eia.doe.gov/emeu/mer/natgas.html

[Aufan 1983]

Still falling in after hours. Going to be watching for more decline to grab a few more. I also found this research done by a member of another board and it is very interesting so check it out.




More Historical Natural Gas Pricing Research & Conclusions

In light of today's decline in natural gas, I dug a little deeper in analyzing the investment opportunity of this complex at this price. Here is what I found ...

>> The last major decline in natural gas bottomed at $6.95. Today's low was $7.21. While this suggests that some further downside is possible, there is support around 3% below today's low. Support around that $6.95 price would also satisfy the calls for a print with a six handle on natural gas.

>> In the last 52-weeks, UNG has bottomed twice in the $33-34 range, both representing the all-time lows for the index. Granted, UNG only started trading in April 2007, but these levels should nonetheless represent decent price support. The two lows were $33.23 on 09/04/2007 and $33.58 on 12/27/2007. Today's low was $33.30.

>> Since 1994, holding natural gas from the last trading day in August all the way to December 31st of the same year resulted in a net gain 11 times and a net loss only 3 times. Over that period, the average return has been +23.0535%. Normalizing the returns by removing the two most bullish years and keeping all the bearish ones, the average return only drops to +14.0425%.

>> Since 1994, in every year except one (2007), if you bought natural gas on August 31st you realized a near-term drawdown in price (in September) relative to your cost basis before ever realizing a net gain. The average drawdown since 1994 has been -9.9635%. Normalizing returns by removing the two largest and two smallest data points in that sequence reduces the average drawdown to -8.701%. Relative to its close on the last trading day of August of this year, natural gas is down -8.712% so far.

>> Since 1994, despite the aforementioned drawdown relative to end of August cost basis, natural gas has registered a net investment gain by at least October 10th in every year. So, if you bought natural gas on the last trading day in August in any year since at least 1994, every single time you realized a net investment gain between 10/10 and 10/31. The smallest gain realized was +7.00% on 10/30/2005, and the largest gain was +81.17% printed during the week of 10/18/2004. The average gain realized between 10/10 and 10/30 relative to end of August pricing since 1994 has been +32.9607%. And, again, normalizing the returns by removing the two smallest and two largest data points, the average return drops to +30.711%.

>> Since 1994, the absolute peak in natural gas prices between September 1st and December 31st of each year has occurred between the days of 10/17 through 10/31 or 12/01 through 12/24. Natural gas prices have alternated in two patterns between these two date ranges in determining when prices would top. One was a pattern of 10/12/10/12 and the other 10/12/12/10. Extrapolating both patterns into 2008, they both yield the same conclusion, that natural gas prices between 09/01 and 12/31 of this year should peak in December.

>> Since 1994, the net investment return on natural gas from and end of August pricing to the highest print between 09/01 and 12/31 has been +59.6507%. Normalizing such drops that return to +55.028%. Over that period of time, natural gas has always realized a positive investment return at some point between 09/01 and 12/31. The smallest maximum investment return relative to end of the August pricing between 09/01 and 12/31 was +11.95% in 1999. The second smallest was +28.06% in 1994. The largest was +145.99% in 1996, and the second largest was +105.56% in 2000. But, again, 100% of the time since 1994 natural gas realizes a positive investment return between 09/01 and 12/31 relative to its price at the end of August.

Conclusion: While more downside may exist near-term for natural gas, analysis of historic pricing suggests that it is worth holding into at least 10/17 through 10/31. With history as a guide, this should result in a positive net investment return of at least +10% with an average return of between +30.711% and +32.9607% relative to a cost basis of $36.76 on UNG and $7.943 on the actual underlying commodity. This would mean that UNG should be priced above $40/share before 10/31, but likely at some point between 10/17 through 10/31, and on average could be in the range of $48 to $49/share by the end of October. Assuming a 1:1 percentage return relationship between natural gas and UNG, and using the average drawdown realized in natural gas in September since 1994, projected support is in the general range of $33.09 on UNG. Again, that support point is just the extrapolation of an average, but it correlates well to the double bottom realized in UNG last September and December. In the end, if you are long, remain patient and look for prices to bottom and trend higher into the latter half of October. If you are short, it seems advisable based on the risk/reward scenario outlined above to begin to back out of your position. And if you do not have a position, I would remain patient and look for entry through UNG at any price between $32.25 and $34.00, with the intent of holding into at least the latter half of October and possibly into the first three weeks of December.

[BadThad]

I think this will be a play, but LNG prices keep dropping along with oil. A bottom is to be found certainly, but I'm not sure if that time is now. This is definately worth watching!

[Aufan 1983]

Originally Posted by BadThad

I think this will be a play, but LNG prices keep dropping along with oil. A bottom is to be found certainly, but I'm not sure if that time is now. This is definately worth watching!

I grabbed a few more to stash away @ 32.60 but of course it fell on down to 32.45.....

Bounced back to 33.30 now.

I'm no expert in natural gas pricing but I'm very familiar with historical pricing and trends. Not betting the farm but I'm pretty comfortable in thinking this is about as low as she will go.

What makes natural gas plays insane is the fact that the many electric companies are now HUGE consumers of natural gas for the production of electricity. Winter is coming and the companies will be pre buying for winter gas. Hopefully demand will be high and drive this back north.

[eschberg]

I was looking into this pre-Gustav and I'm really glad I didn't jump in then. The EIA numbers come out at 1030am EST today and they are looking for a build of 88Billion cf.

[Volatile22]

Wanted to bring this one back to everyones attention. Natural gas continues to drop and UNG is following it downward. UNG is currently at 13.47 and is making 52 wk lows pretty much every day. Natural gas is at all time lows right now. Once the bleeding stops UNG will start looking very appealing. Check out the chart:

[thegreatgate]

Closed on the 52-week low: $13.12
Hurricane season is coming, maybe that will send Nat Gas and Oil back up?

[BadThad]

Thanks for rebooting this thread, the bottom is here IMO. I think it's about time to start pouring some cash at this.

[BadThad]

Down below $13 today, put in a small limit order below $13....time to start building a position.

[thegreatgate]

Current price per million Btu (British Thermal Units) = $3.46 cents (+10 cents / +3.03%)

New York Natural Gas Futures Contracts for Summer Delivery Gain
By Reg Curren
April 28, 2009

April 28 (Bloomberg) -- Natural gas futures for delivery during the warm-weather months gained as utilities took advantage of prices near six-year lows to stock up. New York was forecast to reach a high of 89 degrees Fahrenheit (32 Celsius) today, 24 degrees above normal, the National Weather Service said. Cooling demand in the U.S. will be 25 percent higher than usual over the next seven days, according to Weather Derivatives in Belton, Missouri. “We’re starting to look a bit toward the power generation season and pricing that in a bit,” said Lisa Zembrodt, an analyst at Summit Energy Services Inc. in Louisville, Kentucky. Natural gas for May delivery rose 6.8 cents, or 2.1 percent, to settle at $3.321 per million British thermal units at 3:04 p.m. on the New York Mercantile Exchange. The futures fell to $3.155 per million Btu yesterday, the lowest price since Sept. 5, 2002. The May contract expired today. The more actively traded June futures contract gained 7.8 cents, or 2.3 percent, to $3.44 per million Btu. The October contract, the last one before the start of the peak-demand cold weather season, advanced 6.6 cents, or 1.7 percent, to $3.934. Gas futures are down 76 percent from a high in July as weakening demand during the recession slashed demand for the industrial and power-plant fuel. “We got some solid air-conditioning demand over the weekend in the Northeast,” said Stephen Schork, president of the Schork Group Inc., an energy markets consulting company, in Villanova, Pennsylvania. “The weather is a little bit supportive.”

Summer Demand
Schork said utilities may be taking advantage of low prices now, anticipating an increase once higher temperatures kick in during the summer that would boost demand for electricity from gas-fired plants to power air conditioners. “Why wouldn’t you buy gas now?” said Schork. Prices yesterday fell to the lowest in more than six years on reduced demand from factories and power plants during the recession. “Gas is experiencing another one of its spasmodic moves higher after posting another new low,” Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York, said in a note. “That is what is to be expected from an oversold market.” Zembrodt said a recovery in demand because of higher temperatures and an easing of the recession may come as the full impact from production cuts hits supplies. Chesapeake Energy Corp., the second-biggest independent U.S. gas producer, said earlier this month it has curtailed about 400 million cubic feet a day of output.

Gas Rally

A reduction in supplies throughout 2009 is setting up natural gas prices to move higher, especially with a slight recovery in the economy anticipated in the second half of the year, said Peter Linder, an analyst at DeltaOne Energy Fund in Calgary. “The main reason to be optimistic is the significant and consistent decline in drilling,” Linder said. “That has got to translate, imminently, to lower production.” Natural gas prices may dip toward $3 per million Btu, though they won’t stay there for long as producers will shut in more output at that level, said Linder, who anticipates a price rally to between$4.50 and $5 by the end of the summer.
The number of gas rigs operating in the U.S. has dropped 54 percent since September as prices collapsed, data published by Baker Hughes Inc. showed. Gas rigs fell by 18, or 2.4 percent, to 742 last week, the lowest since the week ended Feb. 7, 2003. The count is down from a peak of 1,606 on Sept. 12. Prices this summer will probably average about $3.60 per million British thermal units, down from an earlier estimate of $4.40, because of sluggish industrial demand, Samantha Dart, Jeffrey Currie, Allison Nathan and David Greely, analysts at Goldman Sachs Group Inc., said in a report today. The analysts raised their summer 2010 forecast to $7.50 from $7 per million Btu as the drilling rig count falls further and production drops. “We continue to expect that U.S. domestic production in particular will increasingly deteriorate in the next several months,” the analysts said in the report. Production will decline 0.3 percent in 2009, the Energy Department said earlier this month.