Thursday, February 4, 2010

Let's Dispel Market Fallacy: The U.S. Dollar Does Not Drive Natural Gas Fundamentals

Depite all the rhetoric about the risk trade, long commodities, short the dollar, one simple fact holds true.

U.S. Natural Gas is completely decoupled from the Global oil markets, as it is prices on simple supply/demand metrics and not indexed to oil, PPI, CPI, or any other oil based formula.

Additonally, the global ups and downs of the U.S. Dollar and other currency volatility that effect the oil markets and oil related products, should have no effect on the domestic U.S. Natural Gas market

Now, what has happened during the past year is that the hedge funds and financial institutions traders have lumped in natural gas with Oil and othe commodities into what the market continues to refer to as the "risk trade".

So, lets exercise and dispel this fallacy once and for all. The U.S Natural Gas sector is "domestic", we import what Mr. would refer to as a "nat on the elephants ass" in LNG, as we simply don't need it.

What drives the U.S. Natural Gas market is winter/summer weather patterns, and the electric power generation industry, as they are the primary consumers of natural gas, as of today.

Smart money knows this and has positioned accordingly.

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This column, Energy Commentary from Karl Miller, is the opinion of Karl Miller.
Content found in the articles is subject to the terms found in the disclaimer and does not represent a recommendation of investment advice. Investors should seek the advice of a qualified investment professional prior to making any investment decisions.

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