Opportune Time to Invest in Natural Gas

NEW YORK (TheStreet) -- Natural gas prices haven't gone anywhere in 2010, and that has made the sector look a little less appetizing to the analysts recently. I'm going to tell you why this might be the best opportunity you're going to get this year in this sector and where to take your best bets.

Natural gas hasn't followed the pattern of crude oil. While prompt prices (future prices closest to expiration) for crude have rallied throughout 2009 and increased their gains somewhat in 2010, now touching almost $82, natural gas has languished this year, starting in January at close to $6 an mMbtu but now closer to $4.50.

I've written over and over again about the divergence between these two energy prices and why I believe oil has been financially motivated while natural gas has been adhering to fundamentals, despite similarly well-stocked demand and supply pictures.

But no matter what you use to analyze the picture, one thing is clear: With new shale finds and the technology to get at them, we are literally swimming in natural gas and look unlikely to have a fundamental shortage, if we choose as a nation to pursue this domestic fuel.

As "natty" prices have sagged, analysts covering the space at the big houses have taken fresh looks at their projections for 2010 and 2011. Both Credit Suisse and Morgan Stanley revised their forecasts yesterday and have changed their targets for companies correlated to price, downgrading two of the dedicated natural gas companies I also follow, Chesapeake(CHK) and Devon(DVN). It is hard to argue with their logic.

That would mean I am bearish on price, right?

To the contrary, I think this marks a great opportunity, although perhaps not with these two specific stocks.

You need to get a historical perspective on natural gas prices to even consider what I'm about to tell you, but our domestic fuel has had two very significant spikes in price in the last five years, hitting almost $14 in 2008 and rocketing to almost $16 in 2005.

Of course, the picture has changed in supply and technology -- yada, yada. I make light of this because the spikes that we saw in 2005 and 2008 weren't exactly created in the middle of a supply crisis, even if the fundamental picture was different from today.