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Natural Gas 2.0

Written by Luke Burgess
Posted March 4, 2019

Baby, it's cold outside...

Don't put your winter coat away yet. Cold weather, snow, and icy rain are forecast across the 2,600-mile stretch from L.A. to D.C. over the next several days.

As a result, it's expected that Americans will keep their heat turned on longer into the season this year — and create a seasonal peak for natural gas demand sometime this week or next.

Typically, natural gas demand in the U.S. would have already peaked for the year. But the colder weather is boosting demand.

Let's back up for a moment...

Natural gas is far and away the most popular way Americans heat their homes.

About 50% of all U.S. houses use natural gas for heat. And in colder parts of the nation, up to 70% of homes are heated with natural gas.

It's a vital natural resource, and our society is built so that natural gas is so important, it can mean life or death. In fact, a study published by British journal The Lancet analyzed data on over 74 million deaths in 13 countries between 1985 and 2012 to find that cold kills 20 times more people than heat.

So natural gas really is more important than most people consider. Yet, due to this year's demand, some utilities are struggling to keep up — even reporting natural gas shortages.

Last week, Xcel Energy urged its customers in Minnesota to lower thermostats in an effort to conserve natural gas. Temperatures in Minneapolis were sub-zero last week, reaching all the way down to around -30º — that's about twice as cold as inside your freezer.

Because it's a heating fuel, the demand for natural gas is cyclical. Every year demand for the fossil fuel increases in the winter and falls with the warmer temperatures.

nat gas demand 3/19

March is usually the time of year when demand for natural gas in the U.S. begins to slow and inventories being to rise.

But not this year.

Due to this year's late-winter cold, analysts expect U.S. natural gas demand to seasonally peak sometime this week or next. Bluegold Research expects natural gas to peak within the coming weeks, saying, “Total demand should reach a near-term peak on March 7, but is still projected to grow (in annual terms) for another five weeks.

This year's late-season demand gives us great support in our long-term bullish outlook for natural gas.

Fact is, natural gas is one of the fastest-growing markets in the energy sector. Since 1986, U.S. natural gas consumption has increased by 85%. And demand isn't slacking off.

The EIA forecasts natural gas consumption in the U.S. to continue increasing another 40% between now and 2050.

nat gas demand 2 3/19

Even though it's literally older than dirt, natural gas is experiencing a Renaissance in popularity — a Natural Gas 2.0, if you will.

That's because using natural gas is so much cleaner than other fossil fuels. Compared to coal, for example, natural gas emits half of the carbon dioxides when burned. Of course, they are not the best of friends, but among many environmentalists, natural gas is the preferred energy fuel.

On Friday, we discussed Mexico's natural gas crisis. Like in the United States, demand for natural gas in Mexico is on the rise. Unfortunately for Mexico, it doesn't have enough natural resources to meet its demands. So the United States, being the world's number one producer of natural gas, imports the fuel to Mexico.

With the demand for natural gas rapidly increasing here and in Mexico, U.S. producers of natural gas are set to have guaranteed customers for the next several decades.

American natural gas producers such as Chesapeake Energy (NYSE: CHK) and Anadarko Petroleum (NYSE: APC) are among those that we like most right now. We urge all energy investors to hold a long-term position with good exposure to natural gas.

Until next time,
Luke Burgess Signature
Luke Burgess

As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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