Bring The Pain: USL vs. UNG

Well I hear people proclaiming nat. gas is going to 0. All the while the weak dollar is sending oil into the 80’s.

Hurricane season is going to be weak.

We are so overstocked in natural gas that half the country smells like Iowa.

Note: Not that Iowa has a lot of natural gas it’s just the smell I’m referring to, and if you live in Iowa don’t get all pissed off, I lived in Cedar Rapids for awhile when I was a kid so I know what the hell I’m talking about.

We are also having a fairly mild start to the summer season.

Given all of this you ask, “Why monkey, why?”

Well, because natural gas can be substituted for oil and coal in many applications and therefore the price can get too skewed for too long without this substitution effect coming into play.

That along with the still tight storage situation makes it difficult to build up nat. gas reserves too high.

All in all I see this as another situation that will correct itself in due time and putting on a starter position here makes sense to me.

Disclosure: Still currently long UNG OCT 15 calls an avg of $1.80