New Money Morning Report: Natural Gas Prices Plummet to $0 in 2012

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Natural gas prices are about to go through the worst bottom in history. In fact, Global Trends Specialist Jack Barnes says producers won't be able to give away their product before the worst is over. Learn why - and how to stay out of the way as natural gas prices plummet - in this new Money Morning report.

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Natural gas producers will be – literally – giving away their products before the year is out.

Natural gas prices could fall to $0.00 this year, says Macro Trends Specialist Jack Barnes.

That number's not a typo. Jack is predicting natural gas producers will be – literally – giving away their products before the year is out. And that's only if they can find any customers to buy their massive overstocks...

Forget about a natural gas “renaissance”. Inventories are rising. And use is about to plummet. In fact, according to Jack, America will soon have the world's largest natural gas glut in history.

Just look at the numbers...

Gas prices fell to a 10-year low, recently. And drillers are already taking rigs offline because they can't turn a profit. But Jack notes, that's not enough to bring prices back up.

Here's why:

Normally, the ratio of gas to crude oil prices should be about 6:1, says Barnes.

And with crude oil averaging $100 per barrel right now, natural gas prices should be between $16-$17 per unit.

But they're not. In fact, at current gas prices, that normal 6:1 ratio is stretched to an absurd 37:1 - not even close to the historical benchmark.

At this ratio, drillers might as well turn off their rigs or – if possible – switch over from natural gas to oil-producing wells, says Jack - all because a new factor inside the gas industry is making it impossible to bring the gas-to-oil ratio back into balance.

Granted, the United States is experiencing an unusually mild winter, especially across the Snow Belt.

This is having a temporary effect on natural gas prices. It's driving up gas inventories and driving down prices. But according to Jack, that's not the real reason natural gas prices will continue to fall in 2012... And why those prices could hit zero in coming months.

If it were just the mild winter, then the laws of supply and demand would soon take care of the balance. Drillers would stop drilling until inventories fell and prices rose.

But that's not what's happening. Despite drillers taking rigs offline, more natural gas is being pumped into the system.

The natural gas glut is growing at an alarming rate. Pretty soon storage and pipelines will reach capacity. Drillers could be forced to burn off new product just to keep from overloading the system. And according to Jack's research, the real reason behind the worldwide gas glut could have less to do with demand constriction and more to do with those higher oil prices...

Could the natural gas “renaissance” be over already?

And what happens when the gas price hits zero?

Find out in this new Money Morning report from Jack Barnes.

Money provides valuable investment research and analysis to its more than 550,000 readers every day. Jack Barnes is one of many market and industry experts who offer unique insights on new investment trends and little-known companies and industries, while showing readers the truth behind today’s biggest news stories.


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