This Is What A Bottom Looks Like
This is what a bottom looks like.
There’s nothing to get excited about.
There are no “bright spots” at all.
All hope is lost. The last investor who was holding on and hoping has sold.
And, most importantly, every investor doesn’t want to touch it.
That’s how bottoms are made.
Right now all the signs look like a bottom is in for natural gas.
Gassing Up For A Long Drive (Higher)
A few weeks ago we talked about how natural gas prices had cratered.
In Perfect Storm Craters Natural Gas we reviewed how:
Everything that can go wrong for U.S. natural gas has gone wrong.
The final straw came this winter which is, on average, much warmer than history.
As a result, natural gas consumption is way down, supplies are up and prices have fallen to historic levels.
The crash was inevitable.
It’s all part of the natural commodity cycle of which we’re entering the third phase.
The first phase is the ramp up of production in anticipation of demand soaring in a perfect scenario.
The second phase is that scenario not playing out perfectly and prices crashing.
Then comes the third phase which becomes the bottom.
Based on recent news, the last phase is what we’ve entered now.
For example, Chesapeake Energy (CHK) is one of the largest natural gas producers in the country and was a driving force behind the shale revolution.
It announced last week it will be sidelining some drilling rigs.
The company isn’t alone either.
Nick Dell’Osso, Chespeake’s CEO, said, "We certainly see that it's prudent to pull back capital, and we think we're seeing others do the same.”
Reuters reported earlier in February that, “U.S. energy firms cut the number of natural gas rigs by the most in a week since October 2017.”
This is a complete turnaround from earlier in the year when natural gas prices were soaring.
If it’s darkest before dawn, this is a black hole.