How to Checkmate the Energy Market in One Simple Move
We’ve dedicated an entire week to the upcoming launch of our new publication, Oil & Energy Daily. (Reminder: The first issue will hit your inbox on October 31.)
I hope you’re as excited as we are.
Well, today I decided to give everyone a head start on profits.
In fact, think of today’s issue as a sneak peek at the types of profit opportunities we’ll be pumping out every week.
To kick things off with a bang, let’s consider the biggest, most profitable development I’m tracking right now…
It’s a sector play that could (easily) hand you double-digit gains next year.
Without further ado…
An 84% Gain Is Just the Beginning
The sector I’m talking about is natural gas. And the biggest reason I’m tuned in is price.
While natural gas prices fell below $2 per mcf back in April, they’ve since rallied 84% to their current level of about $3.50.
My team has been predicting the prevailing uptick for a while – and it’s only going to accelerate over time.
Now, considering that all energy analysts can talk about is how the “natural gas glut” will keep a cap on prices, you might need some convincing.
You’ll recall that yesterday I told you to drown out all “the noise” in the energy market.
Conventional wisdom among analysts here is a perfect example of such noise.
Don’t listen to it.
Granted, there is a large supply of natural gas. But demand is rising sharply, as power suppliers switch to natural gas to take advantage of the cheaper, cleaner-burning fuel.
Power companies have pulled the plug on more than 35,000 MW of coal-fired energy. That’s more than 10% of the country’s total coal energy capacity.
Indeed, coal has seen its share of U.S. energy demand shrink from 20.2% in 2011 to just 18% this year. At the same time, demand for natural gas is set to rise to 27.4% this year – up from 25.5% in 2011.
Power companies aren’t the only ones fueling the natural gas boom, though. Consumers are also contributing in a big way.
Currently, 50% of U.S. households use natural gas for heating. But like energy companies, more homes are making the switch to save cash.
And let’s not forget the massive potential for liquefied natural gas (LNG) exports, either.
The United States could be exporting as much as 100 million metric tons of LNG per year by 2025, driving natural gas demand through the roof.
To top it off, there’s one more catalyst ready to push natural gas demand – and, in turn, prices – into the stratosphere. And that’s government support.
For the first time in recent memory, the U.S. government is wholeheartedly endorsing the use of natural gas.
The cynic in me attributes this change of heart to lobbying from the oil companies. Seriously.
You see, over the past decade, oil majors have accrued massive natural gas portfolios. And now that they have sufficient holdings, they’ve given their lobbyists the green light to launch a propaganda blitz extolling the virtues of natural gas to politicians.
Such a reality will lead to more favorable legislation for the commodity, further accelerating the natural gas price rebound.
Now, here’s the best part: There’s a chance for you to snag massive profits from this black swan event.
The Turnaround Play You Better Not Miss
There’s no doubt it’s been a tough couple of years for natural gas producers. But those that survived are leaner and stronger for it. And many are now on the cusp of seeing their share prices skyrocket.
By how much?
Well, barring a severe economic downturn, natural gas prices will break $4 per mcf next year – and likely hit $4.50. Producers will then be able to hedge at even higher prices in the futures markets, probably at $5 to $5.50 per mcf.
Such a scenario would translate to a 30% to 50% increase in earnings for natural gas companies, a surge that would certainly be mirrored in stock prices.
Better yet, the country’s biggest natural gas producers, like Chesapeake (NYSE: CHK) and EnCana (NYSE: ECA), are still underperforming. So it’s clear that the recent price rebound is not yet reflected in their shares.
I expect that to change over the coming months.
Higher gas prices will lead analysts to reappraise these companies’ assets. At that point, all the skeptics will finally climb aboard and the stocks will rocket higher.
Rest assured, with our new, “Forever Free” e-letter, Oil & Energy Daily, I’ll be keeping you abreast of every emerging profit opportunity along the way.
It all starts with my brand new report: How to Roll Gas Prices Back to the Year 1993.
Remember, as a Wall Street Daily subscriber, you’re automatically set to receive the inaugural issue (including the special report) next Wednesday.
There’s nothing extra you need to do. You’re already in the loop. But if you’d like to learn more about Oil & Energy Daily before the first edition broadcasts, you can manage your subscription here.
Ahead of the Tape,
Karim Rahemtulla
Related Topics: Commodities, Oil and Energy
