AMP Capital Buys Natural Gas on ‘Imminent’ Price Gain
By Shani Raja
29 (Bloomberg) -- AMP Capital Investors, with $95 billion under
management, is selling oil futures to buy natural gas contracts in
anticipation of an “imminent” price spike.
The price of crude
oil, which has almost doubled from last year’s December low, and
natural gas, which has continued to tumble, has diverged so much that
consumers will switch to the cheaper energy source, said Nader Naeimi,
a Sydney-based strategist at AMP Capital, a unit of Australia’s biggest
provider of pension plans.
“The price of natural gas is so low
at the moment, and production’s been cut back so much, that a slight
rise in demand is enough to trigger a huge price spike,” Naeimi said by
phone today. “While other commodities have rallied, natural gas has
been left substantially behind in the energy complex.”
of a global economic recovery has driven oil prices in New York up 93
percent since Dec. 19, when futures settled at their lowest since
February 2004. The price of natural gas has slumped by more than a
quarter over the same period.
The number of oil and natural gas
rigs operating in the U.S. has more than halved from a two-decade high
of 2,031 in September as the recession eroded demand, according to data published last week by Baker Hughes Inc.
“Spot is trading
at much lower levels than long-dated natural gas contracts,” said
Naeimi. “That means the market is expecting prices to rise. Everyone’s
storing natural gas to sell at a higher price in the forward market.
You also have a push for clean energy globally, which should benefit
Earlier this month, AMP Capital upgraded its
holdings of commodities to an “overweight” allocation from
“underweight,” taking money from its cash reserves on speculation
demand will strengthen. AMP also holds heating oil and gasoline in its
In August, Naeimi said surging commodity
prices had hit a “choking point.” Crude oil, which reached a record
$147.27 a barrel on July 11, fell to as low as $32.40 a barrel in
The global recession, caused by the collapse of the
U.S. mortgage market and an ensuing credit crisis, eroded worldwide
demand for commodities last year, driving prices of both copper and
crude oil down more than 50 percent.
Natural gas is the most “undervalued” commodity, investor Marc Faber said in an interview with Bloomberg Television on May 27.