Find Out If Investing in Gas Is a Good Move in 2020

Gas prices have dropped significantly in recent days. This makes it a good time to look into this commodity and see what it might offer investors. To do this, we need to consider all of the factors that affect its price.

Current Gas Prices

At the start of February 2020, the price of gas dropped to a four-year low. Natural-gas futures have been hovering around $1.80. This price is based on a million British thermal units

This downward movement has seen it dip as low as it has been since March of 2016. Around 16% has fallen off the price in the year to date.

Historically, the price has tended to be a lot higher. Just last year, it reached the heights of over $3.70. Previously, it has reached over $19 in 2005 and fell to under $2 at the start of 2016.

The Issue of Supply and Demand

Like most commodities, supply and demand plays a huge part in the price of gas. This means that we need to aware of factors such as weather predictions, as well as any issues in the supply chain.

Let’s take a look at why the price is now so low compared to last year’s heights. In 2019, there were predictions of a brutally cold winter. Seeing the possibility of demand for gas peaking, a lot of investors decided to buy gas futures.

In the end, global weather conditions have been hitting the news, with storms and heavy rain causing chaos in many places. Yet, the temperatures never really plunged to the sort of extremes that we expected. As a result, the demand for gas was lower than exdected.

Consumption has also dropped in some countries, notably China. This is partly due to the Coronavirus outbreak and partly due to a rising demand for renewable energy.

The Production Numbers

Another factor to take into account is the rate of production. This has been increasing in the last year or so.

What Does 2020 Hold in Store?

Since we have seen the effect of supply and demand, we can start off by looking at the weather forecast for 2020.

Firstly, the Farmers’ Almanac is usually a good source for the US. They mention “bitterly cold winter conditions” in many parts of the country, as well as “yet another freezing, frigid, and frosty winter” for most of the US.

While their prediction for the start of 2020 hasn’t quite come true, they talk about spring coming late, with snow and chilly weather until April.

Other predictions suggest above-average temperatures in the US this spring. Forecasts for Europe and beyond also mention higher than average temperatures in the first quarter of 2020.

Long-term weather forecasts are notoriously difficult to get right. There are just too many variables involved to be certain. However, the recent trend for global temperatures to rise make it seem likely that 2020 is warmer than gas investors would like it to be.

In terms of supply, the signs are of there again being more gas available than is needed. This may change as drilling slows down at the end of the year, but for the moment there appears to be little potential for a shortfall of supplies.

Summary

The low price of gas makes it tempting to suggest that now is a good time to invest in it. However, the supply and demand factors tell a different story. Other commodities like copper and gold seem to provide more possibilities for profits in 2020.