Since the peak in mid-2008, natural gas has been playing an impressive game of limbo. Just when you thought it couldn’t go any lower, down it goes. Last year we wondered whether the market was about to find the bottom, but we clearly spoke too soon. Today the price of natural gas in the futures market went below $2.00. In nominal terms, natural gas hasn’t been this cheap in more than 10 years. In inflation-adjusted dollars, we are looking at the lowest price since at least 1994.

The list of factors driving this downward plunge is straightforward: production increases have been outstripping demand, leading to record high stocks. Production capacity reached a record high just as the US went into one of the warmest winters on record. Now, seasonal forces are coming into play: as we enter spring, heating demand is drying up, but it is too early for the summer heat to increase electricity demand.

There are also structural impediments to increased demand. Consumers and business that want to convert to natural gas to take advantage of lower prices must still dedicate time and expense to switching over. Converting or building new natural gas electrical plants requires even more investment. And, even though prices are low now, the past volatility of natural gas gives good reason to pause before making a long-term commitment. Barring an unexpected shift, some analysts are now seriously considering the possibility that the US may actually run out of capacity to store natural gas later this year.

Despite the long, seemingly inexorable decline in natural gas prices, not many of the CTAs we track are currently in short positions in this market. A brief surge in the price in late January of this year stopped out most of the programs who were short natural gas. Those who are short, like James River Capital and Futures Truth, entered the trade after that January spike, and are certainly enjoying the downward trend. While the short natural gas play has been a good one lately, it’s worth remembering that prices can only fall so far – they’re not going to start giving the stuff away. Like even the most limber of limbo masters, there will eventually come a point where it just can’t get any lower.