Update - Should Producers Hedge Natural Gas Now?

January 22, 2014

YES! Earlier this month gas dipped below $4.00 momentarily because Commodity Index Funds were readjusting their portfolios. With that selling out of the way, traders refocused on the weather and were able to rally prices above $4.50. Bal 14 swaps at $4.36 are attractive, given that 2013 averaged $3.65 and the previous 5-years averaged $3.77. Cal 15 is trading at $4.17. We recommend hedging Cal 15 with collars, for example $3.95 floors vs. $4.50 caps.

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