Thursday, February 02, 2012
Natural Gas vs copper
North American prices for natural gas are getting hammered. Copper, by comparison, is holding up well. Here is a chart of the ratio of Natural Gas Price to Copper Price, covering the last 3 years.
Copper price is a global indicator of economic conditions. Its current strength indicates that global demand remains firm. Natural gas prices are more regional; North American gas prices reflect the new shale gas supplies and a shortage of LNG export facilities. Recall that just 4 years ago, LNG was going to be imported to North America, not exported from North America. That Peak Oil theory has some more waiting to do, perhaps...
Despite the low prices of gas, it is still not cheap to buy the shares of natural gas producers. Here is a chart of Altagas, formerly a Canadian Energy Trust.
What's the message from all this? Hell if I know, I am no investment guru. But gas prices are going to have to go up, sooner or later. And the shares already reflect that. Plus, supplies are being held back because it's not worth producing them. Next, exploration slows down. Eventually prices will rebound. Then the commodity pricing cycle repeats.
PS: Aren't Metals.com and Stockcharts.com amazing?