This from Today’s Financial News:

This is turning out to be a big week for the energy markets. Prices for commodities like natural gas, coal, gasoline, diesel, and of course, crude oil are dropping precipitously. Right now, we are very close to some critical pricing levels. If we drop below them, even bigger declines could be on the way.

First off, let’s look at the king of all commodities, crude oil.

As I write, a barrel of crude is just $1.27 away from trading for less than $60. Many energy experts believe once oil drops below that crucial level, there is nothing stopping it from dropping drastically lower. With a little help from a strengthening dollar, we could see a barrel of crude trading in the $40 range by the end of the year. $30 is a stretch, but it is not out of reach.

Thanks to interest rate cuts in England and throughout Europe today, the dollar stands to continue its currency domination. When London announced it slashed its key interest rate by 150 basis points, the value of the dollar jumped almost immediately.

It now takes $1.58 to buy an English pound and $1.27 to buy a euro. Both figures were climbing over the past week, but thanks to today’s widespread increases in liquidity, European currencies are one again dropping in value. They will drag oil prices down with them.

But crude is certainly not the only source of energy on the decline. Even after a surprisingly low weekly build in natural gas inventories, the popular source of home heat is trading well into negative territory. Right now, a million BTUs of gas is trading for $7.19. Technical analysts believe if it does not close above $7.30 today, we are in for another major drop.

****** Oil at $50 a Barrel — Gold at $500 by Christmas?  ******

With stocks as volatile as nitroglycerin, gold should be trading above $2,000 an ounce! But the dollar insurrection has shaken up the commodities markets. Some experts now put gold’s downside at $500… even $400.

What if they’re right?

TFN’s options strategist Andrew Snyder has developed a gold hedge strategy that could make you money on your gold position either way. Find his Special Report on the Members Only Reports section of HotStockConfidential.com. To become an instant member, click here…

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According to a report by the energy department, natural gas supplies are not quite as high as most experts believed. Over the last week, inventories grew by 12 billion cubic feet. The consensus estimate was for growth of nearly twice that figure.

It is important to note that inventories are 3.7% below where they were a year ago. That is a clue that the fall in prices was not necessarily caused by a reduction in demand. It is a sign that speculators have been forced from the market.

The bullish side of energy

Finally, it is important to look at coal prices. Thanks to [stell producer] ArcelorMittal’s (NYSE:MT) announcement yesterday that it will slash its production capacity by as much as 35% in the coming months, the coal industry has suffered significant setbacks.

Coal giants like Massey Energy (NYSE:MEE) and Peabody Energy (NYSE:BTU) have been significantly wounded over the past two days. They have given back all of the gains they made last week.

Fortunately, there is a glimmer of hope on the horizon. ArcelorMittal promises it will boost production in mid-2009. That means coking coal will jump in demand and the companies that produce it will see their valuations increase significantly.

That is great news for James River Coal (NYSE:JRCC). Shares have been reduced by dramatic proportions and are dirt cheap today. I stand by my recommendation to buy the company’s stock.

The energy industry is in flux. For folks with a long-term bullish sentiment like I have, this is a great buying opportunity.

Remember… Buy when everybody else is selling.

Source:Oil nears $50: Is this a buying opportunity?

As the Gulf population soars, demand for electricity has reached crisis point – so much so, they’re being forced to divert valuable oil meant for sale to the West, to domestic use… and it’s hitting their profits.

Nuclear power is the long-term objective… but until then coal will bridge the gap.

And one little-known company is perfectly placed to benefit from this imminent wave of investment…

A power crunch in the Gulf States has been brewing for years – and it’s reaching crisis point.

As their economies rapidly develop and populations soar, demand for power is rising at a double-digit annual rate.

This demand means profitable oil and gas meant for export has to be burnt to generate domestic electricity – instead of being sold on the open market for record prices.

To maximise the profits from their energy resources, Gulf States will go nuclear. Talks have been held with the US and France and deals have been signed.

But here’s the thing…

It takes time to build and develop a nuclear power station, and something needs to fill the gap until then… and, according to today’s Times, it looks like it is going to be coal.

‘King Coal’ to replace oil – a great medium-term profit play

According to the newspaper, oil-rich Gulf States are planning to start importing coal.

Oman Power and Water Procurement Company indicated in December that a planned 700-megawatt power and water desalination plant may need to be fuelled by coal instead of natural gas.

Last summer Abu Dhabi’s oil output fell by 600,000 barrels per day as natural gas was diverted from injection into oil wells to power stations to meet peak demand for electricity.

I’ve been bullish about the price of coal for some time. Despite its reputation as a dirty fuel, there is simply no alternative.

Overnight, two of Canada’s major coal producers announced a large jump in metallurgical coal prices for 2008.

Fording Canadian coal trust settled contracts at $275/tonne for all coal projects, compared with $93/tonne in 2007. Western Canadian Coal negotiated a majority of is 2008 coal year contracts for hard coking coal at an average above $300/tonne, an increase of 365% over 2007.

There has been supply disruption in South Africa because of the electricity crisis, in China because of heavy snow and now the earthquake, with mines in Australia flooded by heavy rain. Indonesia, the world’s biggest coal exporter, says most of its output for 2008 is already sold!

The outlook is pretty clear to me: Demand is higher than ever, supply is squeezed to the brink.

And I believe I’ve found the perfect stock to profit from the return of ‘King Coal’…

Up 17% since October ‘07 and there’s a long, long way to go yet!

I first recommended my readers get into the coal story back in October 2007… Since then it’s risen 17% and I reckon it has much further to go.

Why? Let me explain.

Besides global demand for the “dirty” fuel at record levels, I expect this unique coal profit play to do very well regardless.

You see, unlike its rivals, the company currently generates revenue from two sources – BHP Billiton’s Crinum underground coking coal mine and Rio Tinto’s Kestrel open cut operation, both in Queensland, Australia.

Their objective is to expand its strategic mining and royalty interests through investment in mineral exploration and mining projects. As an active shareholder, it aims to develop an involved relationship with the companies in which it invests and provides strategic and corporate finance advice.

Management leverages its contacts in the mining industry to find suitable investment opportunities, and liaises with an advisory panel to assess the technical aspects of potential future projects.

Cashflow from the existing royalty streams is either re-invested in new mining interests, or paid out to shareholders.

Great for the share price… and even better for dividends too!

It really is a rare gem in a sector that’s had some troubles of late.

Setbacks due to liquidity problems in the overall market continue to make mining finance difficult to raise from conventional lenders.

As a result, this company – with its strong balance sheet and experienced management team – is well positioned to provide finance for projects that can secure new royalty flows and develop its mining interests.

With coal looking set to fill the gap until the new nuclear revolution happens, there’s plenty more royalties to be had.

Management has proven that it knows what it is doing and tightness in credit markets means the company has lots of investment opportunities from which to choose.

Take a three month trial run of Smart Commodities UK and all details of this share will be yours in an instant.

Regards

Garry White
Editor
Smart Commodities UK

Source: Coal Demand Booms, Here’s One Investment to Buy Now

Last week the Associated Press reported, “Utilities nationwide are raising rates and are likely to push for even more dramatic increases in electric rates in the coming months.”

Americans are already strapped for cash due to rising gas and food prices and a sinking real estate market. So why’s electricity joining the scrum?

Well, a large part of the blame lies with steel… As I wrote last week, steel prices worldwide are skyrocketing. This week, we’re going to look at one of the ramifications of soaring steel prices… soaring coal prices.

Coking coal is the type of coal used in steelmaking. Demand from steelmakers is driving prices higher. In fact, many steelmakers, including the world’s second-largest producer (Nippon Steel), recently agreed to pay triple what they previously paid for coking coal.

Take a look at the following chart of coal prices since 1996…

The Global Insight coal index doesn’t contain any U.S. coal – it’s 60% South African, 30% Colombian, and 10% Australian. But the market for coal, like oil, is global. When the price of foreign coal spikes, the U.S. exports more of its coal… resulting in higher U.S. prices.

So the steel rally has swept coal along with it. But coal prices have not yet gone parabolic like steel prices. Does that mean coal is a good buy for people who are bullish on steel?

Trend followers might find coal attractive. But there’s no easy way to bet on the price of coal except through coal stocks… And coal stocks are expensive right now.

Take a look at the following chart…

Coal Stocks are Expensive

Investors are excited about the coal industry and have bid up the price of coal producers in relation to the price of coal. And any falter in the growth rate of coal prices could lead to a sharp drop in these stocks. So here’s how to play the coal boom.Wait for just such a pullback before buying your favorite coal stock. A few of the big names are Peabody (BTU), Consol (CNX), Massey (MEE), and Arch (ACI). Or you can buy a basket of coal producers with the Market Vectors Coal ETF (KOL).

Coal produces about half of all the electricity generated in the U.S. With coal prices soaring, it’s likely you’ll feel the effects of soaring coal prices in your electricity bill… But if you buy coal producers at the right prices, you should see some profit, too.

Good investing,

Ian Davis