Why Natural Gas Could Head Higher After the Recent Downturn

Natural gas has been a great miracle for the current generation. The gas, which is found deep within the earth’s crust has been used to provide clean energy to household and natural grid. It has been used to replace the traditional coal-powered plants that were known to be heavy pollutants.

In the past, natural gas, which is made up of methane, was not embraced by investors. The demand started to rise in the 1990s as the world started to shift from traditional energy sources. As shown below, in these years, the price surged from $1.53 and reached an all-time high of $14 in 2005. As demand increased, so was the supply. More countries started to mine huge amounts of natural gas that the price started to fall. It reached a multi-year low of $1.6 in 2016.

In the history of natural gas, the story of Enron stands out. Enron was a large Texas-based company that initially dealt with natural gas. Kenneth Lay – its founder – was one of the earliest people to spot the opportunity in the gas. In fact, he was probably the biggest beneficiary to the rally on natural gas. To grow his empire, Ken Lay engaged in several accounting fraud techniques that made the firm overstate its earnings. The company filed for bankruptcy in 2001.

Today, natural gas is trading at $2.90. This is a 3.5% low from where the commodity started the year at. In the past three months, it has attempted to gain, soaring from a low of $2.5. At the current price, the natural gas is attempting to recover the losses made earlier. Its commodities channel index indicator is currently at an overbought position while the moving average indicators show that the commodity may continue moving higher.

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