Prices for natural gas have dropped well below $3 per 1,000 cubic feet (mcf), and the U.S. Natural Gas exchange-traded fund (UNG) has fallen to an all-time low just above $10.

But could natural gas be setting up for a big move? U.S. natural gas stocks are huge at more than 3 billion mcf, the pipelines are clogged, and natural gas producers have to keep pumping to pay for facilities added after oil prices soared in the summer of 2008. But here are some reasons why natural gas prices could turn around:

  • Natural gas prices are the lowest in seven years – how low can they go? In a twist on a market axiom, the cure for low prices may be low prices.
  • Natural gas is a cleaner fuel than coal or oil and, therefore, would seem to be in demand as a more desirable choice for a “green” environment.
  • Hurricane season typically provides a production scare or two if storms threaten Gulf facilities.
  • The Northern Hemisphere winter heating season is approaching.
  • A cool growing season and late harvest appear likely to produce crops that will require more natural gas for drying than usual.

 The full-size natural gas futures contract is not for everyone – a 10-cent move is worth $1,000 and a $1 move equals $10,000. But for the venturesome with a sizeable account, natural gas may be an attractive buying opportunity.