Natural gas bulls have been touting for years that natural gas is the fuel of the future, and, therefore, there is only one direction for price to go, and that is up. However, price activity over the last two years has definitely not been straight up. While there are many significant scientific advantages to natural gas, natural gas prices will still fluctuate according to the same basic economic principle that every asset adheres to -- supply and demand.
Investors and analysts who believe Natural Gas is a promising long-term investment tend to predicate that conviction on several key points:
The U.S. Energy Information Association has projected that Natural Gas consumption will increase by 64% by 2030. Thus, demand is expected to increase.There is only a limited supply of oil available and there are major environmental concerns surrounding the use of coal and nuclear energy, which means there will be an increased demand for natural gas alternatives. Again, demand is expected to increase.Most experts expect U.S. consumption of natural gas to increase only marginally over the next 20 years, so much of the increased demand for natural gas alternatives will most likely come from countries outside the United States.
Currently, the two largest producers, by far, of natural gas are the United States and Russia. Combined, the two countries produce roughly 40% of the world’s natural gas. Forex trading, in general, is not directly impacted by the ebb and flow of natural gas production, but, specifically, Russia’s currency can tend to be impacted in the near-term by natural gas supply/demand levels.
Investors who want to position themselves in order to take advantage of a possible rise in natural gas have several options. First of all, they could buy and hold specific companies that specialize in the exploration and production of natural gas. Secondly, they could go straight to the commodity or futures markets, or thirdly, they could invest in an exchange traded fund.
United States Natural Gas Fund (UNG) is a fund that seeks to track price movements of natural gas by percentage.First Trust ISE Revere Natural Gas Index Fund (FCG) is a fund that seeks returns which correspond to price and yield of an underlying equity index called the ISE-Revere Natural Gas Index.SPDR S&P Oil & Gas Exploration & Production ETF (XOP) seeks returns that basically mirror the performance of the S&P Oil and Gas Exploration & Production Select Industry Index.ETF’s can serve as an integral part of a long-term investors investment portfolio, and current natural gas price levels look attractive for long-term investment. Natural gas demand definitely has the potential to significantly increase in the future. A forex account can be used to track how currencies are moving in relation to fundamental developments that affect natural gas prices.
