Keeping in mind the consideration that commodity market is a two-way market, not just the one-way like the Stock market, investors still believe that rise in the prices give them higher profits compared to the fall in the prices; the reality remaining that one or the other way, it remains the same. Commodity market is a two-way profitable market only because profits remain the same in magnitude in both per unit of rise and fall of the price, other things remaining constant. Why do then people believe that prices rises give them actual profits and price falls do not? One very good anticipated reason for the higher number of long positions compared to the short positions must be the optimism in investors, on the other hand, also reflecting the psychic of the investors. Natural Gas had a sufficient fall but the trends show that there were few short positions for the commodity and now, the prices have started rising, and thus the anticipation may be that now the number of long positions will increase sharply on the grounds of better economic conditions and profitability.

Now, coming to the question- Why would an investor get interested in bringing Natural Gas to his/her portfolio? The inventory reports by the United States of America show that the inventories of Natural Gas have fallen to the lowest possible level in the recent two months. Talking quantitatively, the futures have shown almost a 0.9 percent of gain whereas the gain is around 3.6 percent on the overall. The decrease in the inventory presently happens to be almost twice the five-year average fall, which indeed is a big fall. Because of the inventories decreasing at increasing rate, the overall supply of the commodity is affected and supply is also decreasing day by day, causing the price rise of the commodity in the market. Due to the supply deficit in the market, people have been expecting more of the commodities, as around 50 percent of US households depend on natural gas for heating. Because the job claims report have also been improving in the country, the willingness to pay of the people may increase and the prices may rise sharply further.

So, Natural Gas in Investors’ portfolio is profitable!

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.