Friday, April 13, 2012

T. Boone Pickens Calls the Bottom in Natural Gas, TheStreet Says "Good Luck With That"

We're sticking by our best guess of $1.80 by May-June. It's looking a lot easier now than it did last December.
Because of that everybody and his brother is piling into the trade, futures volume is running 30% above where it was a couple months ago. Last I saw the near futures were up 0.015% at $1.986.
I've not found Mr. Pickens to be much of a timer* when it comes to markets. He gets what he wants through sheer heft. First up, his interview on CNBC a couple days ago:
Nat Gas Prices 'Close to a Bottom': Boone Pickens 
Natural gas prices, which earlier Wednesday broke below $2, are as low as they'll get, T. Boone Pickens told CNBC.

"I have to think you're close to a bottom," the oil and gas driller and head of BP Capital Management told Street Signs before natural gas settled at $1.984. "You’ve got the rig count going down. That’s what you want to watch."
Ten to 15 rigs were closed last week, he said, and more will be closed this week. 

"As the rig count goes off it’s gonna cause supply to shorten up. It’ll take a little while for it to happen," he said.
Pickens has pushed for federal legislation that would put natural gas into commercial vehicles, so he said he was encouraged after hearing Energy Secretary Steven Chu speak at a conference Wednesday about putting natural gas in heavy-duty trucks.

"What a great time to do it," he said, especially when natural gas prices are about half the national average of gasoline at the pump....MORE
Add politics to the 'heft' bit.
From one of the clearest eyed writers on energy, Eric Rosenbaum. 
I was glad to see his byline yesterday, I'd been concerned he was caught up in the big purge at TSCM (now TST).
From TheStreet:
Calling a Bottom in Natural Gas Prices? Good Luck With That
I can't call T. Boone Pickens a fool, but I will say that he's foolish for saying on CNBC Wednesday afternoon -- when natural gas finally broke below $2 -- that a bottom had to be "near" in the historic slide in the price of the most abundant fossil fuel in the U.S. 

Calling a bottom in natural gas is a fool's errand.

Why does a bottom have to be "near"? I see no reason just because the $2 mark was breached, or because Pickens -- who has a history of making confident, yet wrong, predictions about the natural gas market (see his series of annual public proclamations about the "inevitable" passage of the NatGas Act, still languishing in legislative la la land for three years running).

In fact, there's reason to suspect there's considerable downside left in natural gas from here.
"It's never a good idea to pick a bottom," said Adam Bedard, senior director of energy analysis at consultant Bentek Energy. "To me, $2 is a psychological barrier so there is some support there, but people say that's as low as it goes, I think there is room to go lower."
Matt Smith, commodities analyst at Summit Energy, said the $2 mark was definitely a huge psychological level, but like breaking above $100 on oil in 2008, it was a case of not if, but when. Talk of the "one handle" (natural gas trading in the $1s) has been as predetermined as Calvinist faith and as fated as a Greek hero's tragic end....MORE
*Mr. P was caught short in the run-up to the $147 July '08 all-time high. He did reverse and called for $150 oil but then rode it all the way down to the Dec. 2008 WTI spot low of $30.28.
Natural Gas: T. Boone Pickens visited White House Seven Times (CLNE)
"Obama seeks to lift natural gas demand" (WPRT; CLNE)

 And many, many more over the last few years.