The last time we saw the stock market take a dive like we saw on Monday, August 8th was in October of 2008. Sometimes referred to as the Crash of 2008, it set a record weekly loss of 1,874 points or 18.1% during the week of October 6th.

So we began thinking - how would a downturn in August affect the price of natural gas? Looking back at the crashes of 1929, 1987 and 2008, they share one common element - they all began in October! Historically, the price of natural gas goes to its lowest points for the year in August and September. The question is - would a stock market downturn during August or September drastically change the NYMEX historical lows? So we analyzed market prices prior to and after the Crash of 2008 for some answers. Here is what the trend showed:

In March 2008, investors began to get nervous over all the credit market news. Remember, these were the dark days of where Bear Stearns, Fannie Mae and Freddie Mac all fell! The housing news was at its peak and foreclosure was the word of the year! In March 2008, the low for Natural Gas was $8.93 and by July 2008 we saw the high of $13.50! Then as history has always shown, in August and September the prices fell. However, in 2008 the price fall was much more dramatic than prior years.

Could it be that when the investors got nervous over the financial crisis and the housing burst that they decided to invest more heavily into the commodities market, namely Natural Gas? Could that trading and speculation have driven prices up during the months of March to July of 2008? Or, did they wait til July 2008 to make that move driving prices down with their trading and speculation? Supply and demand factors tell us that supply of natural gas was lower than previous year, and and we were tracking some hurricanes on the coast - all signs that would tend to drive up prices. On the downside, we were heading into a mild winter and economy was in recession, driving demand down. Fracking was relatively unknown as a new drilling technology at this time and would have had no real impact.

In Summary

This large dip in the stock market may drive investors to switch from equities to commodities during this unstable time. It may not be a quick movement, but the impact could drive prices in either direction. What we do know is that currently the price of natural gas is low and by all indicators of supply and demand, they could go lower. However, this blip in the stock market could have an adverse effect. This is something that we will continue to watch and report in our blog on a regular basis.