As we’ve noted before, natural gas has been lagging behind oil and demand hasn’t picked up yet.
But this could be the next great energy play…
You see, gas may be trading at low prices at the moment. But some of the world’s biggest economies are pushing for cheaper energy sources. And natural gas isn’t just used for heating or as a transportation fuel. It’s being utilised more and more to generate electricity. So the potential demand is massive.
The chart below shows year-to-date performance of the First Trust Natural Gas (ticker: FCG), an ETF of companies that explore and produce natural gas. It’s up 73% from its 9 March low. And as oil prices have been trending up, investment in natural gas has been getting a boost since it’s a cheaper energy source than oil.
Investors have been showing more interest in natural gas since July 
Source: Yahoo Finance
Industrial activity is a big driver of natural gas demand. This is slack at the moment, but when it picks up, gas prices will get pushed up. Also, as restrictions on harmful air emissions are tightened in the future, natural gas will find more favour as it’s a cleaner alternative to coal and petrol.
Importantly, gas supply is also declining. Rig counts – the number of rigs drilling for natural gas – have shrunk in number by more than half since Sept last year. And they’re continuing to fall. This contracting supply should cause natural gas prices to go up.
Despite weak gas prices and a weak economy, low-carbon policies from some of the major world economies should support demand for this fossil fuel. Natural gas emits half as much carbon than coal. And as clean energy gains more and more traction, demand for this commodity is set to rise. Don’t miss the upturn.
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