Oil Hit Record Highs, Could Natural Gas Be Next?
Apr 18th, 2008 | By Black Bear | Category: Oil Investment & Alternative EnergyPeople have been asking me if it’s too late to buy oil. Heck no, not if you think oil is going to $140 or $150 per barrel this year — and I do. But there’s a better bargain in energy, which I recommended that Secret Order of Jurojin subscribers buy this week: natural gas.
Looking at a weekly chart, you can see that natural gas pushed higher out of an inverse head-and-shoulders pattern early this year. It then spent February and March consolidating its gains, and now it looks ready to head higher again. My target is its old highs.
Seasonally, this is about the time that natural gas usually dips as temperatures go up and heating demand goes down. But that may not happen this year. Here are some fundamental reasons why…
Natural gas consumption in the U.S. increased 6% last year. (Oil consumption was flat.) Going forward, natural gas consumption should rise between 2% and 6% per year.
Production of natural gas in the U.S. is flat, and imports are down because natural gas suppliers can sometimes get better prices in Europe and China.
Natural gas prices did pull back on Thursday, thanks to the most recent report from the Energy Information Administration. That showed a build in natural gas stockpiles of 27 billion cubic feet. On the other hand, it was the first build in 21 weeks. What’s more, stockpiles are still 298 billion cubic feet less than last year at this time and below the five-year average.
You can play natural gas with one of the natural gas ETFs, or with an undervalued natural gas producer. Or, you can go for the leverage of futures and futures options on natural gas. Be sure that any trade fits your risk profile, and run ideas past your investment advisor.
Good luck and good trades,
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