How to Invest in Natural Gas Stocks as Prices Swing Back

There are staggering numbers coming out of the energy world – numbers that explain how to invest in natural gas now…

According to the Energy Information Administration (EIA), in the United States alone is parked over roughly 862 trillion cubic feet of natural gas reserves. That's over a century's worth of domestic supply.

Better yet, there's plenty of domestic demand for that supply -and it's growing.

Plus, energy-hungry countries around the world are lining up to buy America's bounty of natural gas.

That means the long-term outlook for investing in natural gas stocks has never been better – especially with this trend in prices…

Natural Gas Prices Ready to Swing Back

Natural gas supplies hit an all-time high of 3.9 trillion cubic feet last year, as shale gas production overwhelmed demand.

No wonder natural gas prices declined from a high of $15.78 per million btus (mmbtu) in Dec. 2005 to a 10-year low of $1.82 in April 2012 — a breathtaking nosedive of 88%.

And today, the price of natural gas at the Henry Hub — the benchmark supply point in Louisiana — is still way off the 2005 highs.

But supply and demand are beginning to balance out, setting the stage for rising natgas prices. Those ultra-low natural gas prices made shale gas uneconomical and forced companies to cut production.

But they overshot the mark…

Producers have shut down more than half their drilling rigs since late 2011, reducing the number to a mere 400.

In fact, gas drilling has overcorrected to the downside, "well below the 650-675 gas rigs necessary to maintain long-term market balance," Canaccord's Genuity's John Gerdes told Forbes.

U.S. production grew just 1.8% in the first half of 2013 compared to 5.6% growth in 2012 and 7.3% in 2011, according to the EIA.

The trend has reduced current storage levels to 2.786 trillion cubic feet – down 12.5% from last year.

Storage levels have plunged to 63% of capacity, while cold winter weather across most parts of the country boosted demand by 10.4% from January through June, according to the Federal Energy Regulatory Commission (FERC).

But the real exciting news for natural gas stocks isn't domestic demand – there's a bigger, global story that's shaping how to invest in this commodity…

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