Natural Gas Prices Bottom Out (Maybe) and Mr. Investor Feels the Urge to . . . Let’s Think First
Natural gas prices may be recovering from an ugly glut of supply. The Wall Street Journal reports that the record summer temperatures that are baking crops have also prompted people to turn on their gas-powered air conditioners.
For investors who want to jump into this market in hopes of riding a long-term wave up, there are several options. You could buy a commodities-focused exchange-traded fund and risk watching contango eat up your returns. Contango occurs when futures contracts expiring in the future are more expensive than the current one, so you're essentially forced to sell low and buy high when the contract you own expires.
You could stick with stocks of natural gas producers, whose enthusiasm created the gas glut. Big natural gas producer shares include beleaguered Chesapeake (CHK), but also Anadarko (APC), Devon (DVN) and EnCana (ECA). They track natural gas prices to varying degrees.
After all, summer's half over. This turnaround might not last.