Natural Gas and Crude Futures Fall

June 11, 2013 09:41 AM

Natural gas is on a pedal-to-the-metal bear run, opening today at $3.79 and trailing -- ending the day today at $3.71. EIA suggests $3.68 as an average price when 2013 is all said and done, but industry experts believe that figure is too low, expecting a solid $4.00 handle by the end of the year.

CF Industries estimates natgas between $3 and $5 is sustainable in the current climate and fully expects natural gas to reamin in that range "over the next few years." CF's model has natural gas pricing bound by range trading both by investors and by nitrogen producers, and the telltale stairstep pattern exhibited by natgas futures charts affirms that notion -- see the May 13 natgas futures chart from Yahoo below.may13nattie

Thus far, averaging lowest lows and highest highs puts us at an average of $3.658 year to date. Taken one step further, an average of today's close of $3.71 and the year-to-date average of $3.658 equals one cent above EIA's 2013 price target of $3.68 at $3.69 exactly, hinting natgas is at or near its statistical floor. This suggests upside potential for natural gas pricing ahead, particularly if you expect range trading to continue to dictate the contract's movements as savvy investors play the 'ol buy low sell high routine.

Meanwhile, trhe July WTI crude contract softened today shedding 41 cents to $95.36. July Brent opened the day today at $103.81 and chopped lower all the way down to $101.82 before retracing higher to close at $102.92 -- down $1.03 on the day. Production increases from OPEC nations and waning U.S. demand are currently weighing on crude futures. The WTI/Brent crude spread stands today at $7.56 in favor of Brent.

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