Saturday, May 31, 2008

Natural Gas Better Buy Than Oil!!

SAN FRANCISCO (MarketWatch) -- Natural gas is looking cheap compared to oil. Throw in a hot summer and an active Atlantic hurricane season, and opportunity isn't that hard to find.
"The summer cooling season is here and hurricane season is right around the corner, which won't help any to keep prices low," said Kevin Kerr, president of Kerr Trading International.
Summertime yields greater need for power, boosting demand for natural gas. Hurricane season in the Atlantic may threaten supplies of the commodity produced in the Gulf of Mexico.
"$16-plus natural gas is not only likely -- it's probable -- if we see an active hurricane season that impacts the Gulf," said Kerr, who edits MarketWatch's Global Resources Trader newsletter.
'Natural gas is a relative bargain versus oil.'
— Bernard Picchi, Wall Street Access
Even so, "natural gas is a relative bargain versus oil," said Bernard Picchi, a senior managing director at Wall Street Access.
Simply put, one dollar buys more gas than oil. July natural gas recently touched contract highs above $12 per million British thermal units on the New York Mercantile Exchange. July crude trades around $125 a barrel. One barrel is equal to 5.8 million BTUs, according to the U.S. Energy Department.
"The growth drivers of gas demand are relative cheapness vs. oil, abundance, and relative cleanliness vs. oil and, especially coal," said Picchi.
Natural gas is about 70% of oil equivalent value in the U.S., 80%-90% in Europe and Japan, and probably less than 40% of oil value in developing countries like those in the Persian Gulf, South and Central America, Russia and Central Asia and Africa, according to Picchi.
But even though natural gas has been often dubbed as a cheaper alternative for oil, futures are trading well below the all-time record of nearly $16 they reached following Hurricane Katrina in 2005.

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