Why are futures traders paying so much each month to roll over their natural gas contracts? The annualized cost is currently 178%, this is a high rate.
Together with a contango curve from $3.4 per million British thermal units today to $3.6/mmbtu a month later and $3.7/mmbtu two months later. We can say that traders are already pricing in a rise of 10% in the coming two months.
So you can be guaranteed that the natural gas price will rise. What do you do then? You buy cheap natural gas companies in the short term, for example Chesapeake Energy (CHK).
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| Chart 1: Natural Gas Contango and Roll-over cost |
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