May 3, 2013
/PRNewswire/ -- Energy Solutions, Inc., an educational provider of natural gas price information and price trends, recently advised its clients to "sit tight" on natural gas purchases. This ran counter to the advice provided by several financial firms who were promoting the purchase of natural gas commodities.
Specifically, in its
April 24, 2013
, edition of
Energy Solutions, Inc. provided the following pricing advice:
Natural gas prices are being driven higher by financial firm recommendations advising investors to "go long" natural gas futures and to "go short" gold futures or crude oil futures. As investors seek to profit from these recommendations, open interest in the natural gas futures market has exploded. A surge of buying in natural gas futures is pushing natural gas prices higher, but Energy Solutions, Inc. advises patience.
A natural gas price rally, driven by speculative buying, will typically fail without supportive fundamentals of supply and demand. Energy Solutions, Inc. believes this is what will occur for natural gas.
The electric power sector has an economic incentive to gravitate from the use of coal to natural gas. This frees up gas supplies for injection into storage. This factor, combined with ongoing production growth and improvements in pipeline and processing infrastructure, is expected to eliminate concerns over natural gas supply availability this summer. When that becomes evident, natural gas prices will decline, and the front-month natural gas New York Mercantile Exchange (NYMEX) contract could fall below
, the front-month natural gas NYMEX price hit a 21-month high of
per MMBtu. The next day, the Energy Information Administration reported a storage injection of 43 billion cubic feet (Bcf) for the week ending April 26. Within ten minutes of the storage announcement, the front-month natural gas NYMEX price fell by more than
Sometimes, it is difficult to be patient when there are other players, like some of the financial firms, advising otherwise. However, the benefit of the patience that Energy Solutions, Inc. has been advising is clients is starting to unfold.