Monday, February 1, 2010

Natural Gas: All Market Manipulation Comes to an End Sooner or Later: In this case a Series of Perfect Storms and Industry Consolidation are the Death

Its the classic "short squeeze", the only problem is that the investors being squeezed don't realize it yet, namely the hedge funds and financial institutions piled into the same trade, like a can of sardines despite repeated warnings from Mr. Miller that this congregation was doomed to end sooner rather than later.

Instead of considering the financial risks, they piled into the sardine can further, seemingly in defiance of clear market signals that this was going to be a losing transaction when the music stopped, systemic risk was very high, and the exit doors would be crowded when they tried to get out. As we saw with the mortgage backed securities and credit default crisis recently, the hedge funds and financial institutions are nothing, if not defiant.

Well, here we are, the perfect series of extreme winter storms, (see weblink titled: "Look out!!! A major snowstorm (blizzard) followed by arctic air is lurking in the east again" http://www.naturalgasstocks.com/Karl_Miller/news/2012.asp)

To add further pressure to the short squeez, natural gas in storage is at par, at best, and Mr. Miller believes overstated (see weblink titled: "Natural Gas: Tying Supply, Demand and Politics Together in the U.S. Economy"; http://www.naturalgasstocks.com/Karl_Miller/news/1261.asp)

Finally, and probably most importantly, the industry is in a major consolidation mode with every major heavyweight oil company currently evaluating purchasing the independent natural gas producers like CHK, DVN, APC, EOG, and others. The majors are going to position their U.S. Portfolios for the next 20-30 years now and are in major competition for natural gas production real estate, which means numerous acquistions and joint ventures. (see weblink titled: "Natural Gas is a Buy: Exxon (NYSE: XOM) purchase of XTO Energy (NYSE: XTO) Has Set the Market on an Irreversible Path of Consolidation and Expansion"; http://seekingalpha.com/instablog/522236-karl-w-miller/46......)

Mr. Miller laid out what was coming in very basic and simple terms in his analysis titled "Natural Gas and Oil: Thriving on Chaos"; (see weblink: http://www.naturalgasstocks.com/Karl_Miller/news/1211.asp)

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Disclaimer:

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 InvestorIdeas.com 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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