In our Webinar on Wednesday, we discussed our desire to play UNG but we ended up not being comfortable with the fee structure. Boaty and I have been discussing the situation and we've decided we like FCG, which is sitting at $25.93 with a top channel at $28 for the past few years while our 2nd (KMI) and 3rd (LNG) choices have been flying higher - breaking out of the channel FCG is approaching:
🚢 Based on the comprehensive data available, here's the analysis for FCG through June 2025:
## Natural Gas Price Drivers
**Supply Constraints**
- US dry gas production expected to stay around 103 Bcf/d in Q1 2025[16]
- Limited new capacity additions until late 2025[14]
- Permian Basin pipeline constraints easing but still significant[12]
**Demand Growth**
- Data center electricity consumption driving 3-5 Bcf/d additional demand[3]
- LNG exports projected to increase 15% in 2025[16]
- Cold weather boosting residential/commercial consumption[1]
## Price Projections
**Henry Hub Forecasts**
- Q1-Q2 2025: $3.20-3.50/MMBtu[10]
- JPMorgan projecting $3.50/MMBtu average for 2025[16]
- Standard Chartered forecasting $3.25/MMBtu[16]
## FCG Analysis
**Price Target Calculation**
- Current FCG price: $30
- Expected natural gas price increase: 20% by June
- Historical correlation to natural gas prices: 0.8
- Beta to natural gas prices: 1.2
- Calculated June target: $35.76
**Confidence Level: High**
- Multiple catalysts aligning for Q2 2025
- Strong seasonal patterns support timing
- Infrastructure constraints providing price floor
- Trump administration expected to support natural gas sector[3]
## Options Strategy
Given the $35.76 price target, June 2025 calls at the $32 strike offer attractive risk/reward, with potential upside of 18.5% in the underlying by expiration. The high confidence stems from multiple supporting factors converging in Q2 2025, particularly the LNG export growth and data center demand increases.
Consider a bull call spread to reduce premium cost while maintaining upside exposure to the projected move.
