This ETF Is Headed Straight To Zero

July 14, 2015

With a 1 percent year-to-date loss, natural gas hasn't done anything special this year, but it hasn't done bad either. The commodity, dubbed the "widow maker" by many because of how volatile it is, has had an uncharacteristically well-behaved 2015 thus far, fluctuating in a tight band between $2.50/mmbtu to $3 during the first half of the year.

 

Still, you don't have to go back far to see volatility on the natural gas charts, with prices down sharply from where they were just one year ago, when they were in the $4 to $5 range. A surge in production and a much milder 2014/2015 winter compared with the one before have pressured natural gas significantly. 

Natural Gas

Source: Bloomberg
 

Are prices headed even lower, or is now the time to buy?

Prices Cheap

From a historical perspective, natural gas prices are pretty cheap. The last time they traded at these levels was for a brief period in 2012, following an exceptionally warm winter. Before that, they traded around these levels in 2009 during the worst of the financial crisis.

History suggests that if natural gas prices fall below $3, they don't stay there for long.

That fact hasn't gone unnoticed by bargain-hunting natural gas traders. Since the start of the year, hundreds of millions of dollars have flowed into natural gas exchange-traded products.

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