First let's make the case for investing in US natural gas.
The best time to buy commodities is when they are depressed. Let's have a look at US natural gas for the last 15 years (Source: IndexMundi.com)
If you think a 15-year low might be a good investment opportunity, what about an inflation adjusted 36-year low?
|Source:Our Finite World|
Pundits explains the price is low because of the glut of natural gas attributed to new technologies such as fracking, and this is certainly a very good point. But there is another aspect which is very bullish for US natural gas: international gas market. Russian natural gas and Indonesian LNG are still in a upward trend, and currently Russian natural gas is over 6 times more expensive than US natural gas as shown in the 15-year charts below (Source: IndexMundi.com).
|Russian Natural Gas (1997-2012)|
|Indonesian LNG (1997-2012)|
Finally, Crude Oil (WTI) to Natural Gas price Ratio stands now at over 50, whereas the historical norm has been around 8 to 10. See chart below (Souce: stockcharts.com)
So that means for a given amount of energy natural gas is about 5 times cheaper than crude oil. In reality, this is obviously not that easy as those 2 fuels are not interchangeable, but companies may start to invest more in power plant and transportation that can accommodate natural gas.
Now we have made the case to invest in natural gas, let's see how it can be done
There are some ETF to invest in Natural Gas such as UNG (USA) that are supposed to track natural gas price. However, their cost (due to diverse costs and contango) is prohibitive so that I would really advise against investing in those, unless you are able to correctly guess the price of Natgas within 3 months. Those types of ETF will go to zero by design.
You could potentially invest in companies such as Chesapeake or SandRidge Energy (SD), but if natural gas stays too low for too long some of those companies may go bankrupt and you'd lose all your investment. If you have enough capital, you could buy a list a companies involved in natural gas extraction and exploration, but for most of us, the simplest is to invest in mutual funds or ETF.
First Trust ISE-Revere Natural Gas Idx (FCG) is an ETF tracking ISE-REVERE Natural Gas Index which is composed of the stock of companies dealing with natural gas production and exploration.
Let's see how FCG fared in the last five years (Source: Yahoo Finance).
I'm not fully satisfied with this method of investing in natural gas, but it's the best I've found so far. If you have better ideas, let me know.
I've also seen some companies are selling Oil and Gas Royalty Rights, but I have not checked this into details yet, as it may not be easy to access such investment for oversea investors.