Natural gas futures bulls should be patient.
While scouring the latest market sentiment polls and the trusty COT (Commitments of Traders) report, it is clear to us that most speculators are bearish in natural gas. This should come as no surprise; in the US there is a long-standing supply glut and domestic producers have not ironed out the kinks when it comes to liquifying and exporting the energy. Further, the state of California is proposing policies that will phase out the consumption of natural gas (which is odd because it is a relatively clean fuel source). However, in the long run (years not weeks) the fundamentals are quite impressive. US politicians seem eager to ban fracking and the practice of exporting our energy resources in this area is bound to improve. Accordingly, we tend to favor a strategy of getting bullish on large dips, but not getting greedy on the rips. Natural gas is a trader’s market, not a long-term investors market. Those who forget that will pay a hefty tuition to the market for the lesson.