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Weekend: Natural Gas' Breakout Moment

Keith Kohl

Written By Keith Kohl

Posted December 18, 2010

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.

Editor’s note: For more updated information from Keith Kohl on Shale Gas Stocks, click here…

Any doubts of a mild winter were spoiled this week.


Even in spite of the extremely cold weather, we saw natural gas prices fall below $4/Mcf before recovering slightly on Friday.

I can’t say that I’ve seen a better opportunity for investors to get back into game. Think about it…

We’re working through a major supply-demand imbalance right now.

In fact saying we have “very strong supplies” is a gross understatement.

That glut, however, was inevitableespecially after witnessing the surge in shale gas activity during the last few years.

The rush to develop our shale assets is one reason the EIA reported technically recoverable unproven shale gas reserves jumped to 827 trillion cubic feet. In case you’re wondering, that’s a 134% increase over the previous estimate of 353 trillion cubic feet. 

Right now, inventories are a huge 9.9% above the five-year average, or so said the EIA this week.

According to the weekly report: “The level of working gas in underground storage fell 164 billion cubic feet (Bcf) to 3,561 Bcf during the week ending Friday.”

There was even a decrease in the number of gas rigs operating in the United States. Baker Hughes reported a drop of 13 rigs, compared to the previous week.

The slippery price slope

Unlike oil, natural gas prices have failed to make a comeback.

Crude prices, which plummeted to $33 per barrel in late 2008, have finally broken through the $60-$75/bbl trading range. The general consensus is that crude will average between $85-$90/bbl next year… with an inevitable spike into triple digits.

Since peaking in 2008, natural gas prices have not fared so well.

natural gas prices 12-17-10

And if you are a long-term investor in some natural gas plays like UNG, you’ve felt the sting more than others.

UNG chart 12-17-10

It’s not pretty…

But there’s good news on the horizon.

For starters, colder temperatures will kick-start demand. This week, U.S. natural gas consumption jumped 4.3% to approximately 96 Bcf/d, with a year-over-year increase of 6.6%.  

What we can count on, however, is that the supply-demand issues will work themselves out over time. It won’t happen overnight, but it’s a start.

I have a few natural gas stocks on my radar, including one that is about to change the shale game forever.

I’ll tell you all about this opportunity very soon, so stay tuned.

Enjoy your weekend,

keith kohl

Keith Kohl
Editor, Energy and Capital

P.S. Catch up on the week’s top investment stories from the pages of this week’s Energy and Capital and Wealth Daily…

Iraqi Oil Lies: To the Victors Goes the Oil
Editor Christian DeHaemer reveals oil lies from the Middle East and explains why 12 million bbl/day is nothing more than a daydream.

Greenland’s Real Estate Fortune: Why This Piece of Arctic Tundra is Worth $273 Billion
Ian Cooper’s latest report sheds light on how a small mining company that controls a tiny piece of land in Greenland is raking in a fortune of profits for investors.

The Armageddon Hedge: Gold Headed Over $2,000 an Ounce in 2011
Analyst Greg McCoach uncovers the truth behind the global banking system and reveals his most important strategy to avoid the financial woes caused by those of charge of it.

6 Billion Barrels of Oil Up for Grabs: The Triple-Digit Profits Pocketed from this Mongolian Oil Company
Editor Chris DeHaemer trekked to the heart of Mongolia this year… and he came back with an investment opportunity for readers that has delivered gains up to 618%. Now, this tiny oil company is at it again.

The Hottest Market of 2011: Solar Companies and Analysts See Bullish 2011
Editor Nick Hodge discusses the 2011 solar outlook as offered by company guidance and analysts’ estimates.

Debt Riots Break Out in Greece: Lessons from Greece and Iceland
Analyst Adam Sharp writes of social unrest in the streets of Greece’s capital city, and what this means for the markets…

Solar Stocks for 2011: Howard Stern, Tax Cuts, and a New Solar Stock For 2011
Editor Jeff Siegel discusses the latest in Howard Stern news, tax cuts, and solar stocks for 2011.

A Different Way to Play the Nuclear Comeback: Nuclear Energy Investments
Editor Keith Kohl offers readers another way to invest in the nuclear revival.

The U.S. Dollar Will Collapse in 24 Months: Owning Gold and Silver
Analyst Greg McCoach tells investors how to avoid future financial pains resulting from decades of abuse to the system of credit in the United States.

H5N1 — Heads You Live, Tails You Don’t: The Bull Market in DNA Vaccines
Editor Steve Christ takes a look at the flu season and explains why the H5N1 virus is the ultimate nightmare.

Efficiency Pays: Energy Efficiency Stocks
Editor Nick Hodge explains how companies are finding ways to make lucrative profits by reducing energy usage.

I Want Me Gold: Buy Gold, Buy Oil
Editor Chris DeHaemer spells out why investors shouldn’t wait another second to buy gold and oil.

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