Energy Archives - Page 11 of 27 - Money Morning - Only the News You Can Profit From
Four Timely Moves For The Next Three Crises
We are currently in a brief period between crises. Nothing was resolved in the eleventh (and a half) hour compromise.
The truth is there are still three huge fights on the horizon – revisiting the sequestration (automatic spending cuts) portion of the fiscal cliff, spending versus taxation in the budget, and raising the debt ceiling.
All will hit by early March.
So the reprieve gained on New Year's Eve will be brief.
The spike after the accord was huge. Unfortunately, as we witnessed late last week, the market rally has no legs. VIX (volatility) has been abnormally low, but that will be drifting up, to accelerate as we get closer to the next round of legislative paralysis.
We cannot predict how protracted this next round will be, but early indications are hardly encouraging.
That's why investors need to be more defensive and identify energy components that are more likely to withstand the gridlock and even profit from it.
Overall, you should divide the energy sector into four segments:
- Processors/Distributors; and,
Most members in each of these groups are likely to be vulnerable as we move closer to the end of February. But not all of them.
Here's what you need to know…
Toshiba Talks Highlight Nuclear Power Slow Down
Toshiba CEO Norio Sasaki told Dow Jones in an interview today (Thursday) the company is negotiating with three potential buyers, including Chicago Bridge & Iron Company NV (NYSE: CBI), to purchase a 16% stake in the Westinghouse Electric nuclear power unit.
Toshiba said earlier this year it would consider offers as long as it retained majority control over Westinghouse.
Toshiba paid $4.16 billion in 2006 for a 77% stake in Westinghouse. In 2007, Toshiba sold a 10% stake in Westinghouse to Kazatomprom of Kazakhstan, leaving the company with 67% of Westinghouse.
But Toshiba's stake will jump to 87% in January when a sale from The Shaw Group Inc. (NYSE: SHAW) becomes final. Shaw in September 2011 exercised an option to sell its stock after it agreed to be taken over by rival Chicago Bridge & Iron.
An 87% stake would give Toshiba too much exposure to a nuclear industry rattled by the March 2011 accident at Japan's Fukushima nuclear power plant.
Now Is The Time to Buy These Oil Refiners and Coal Stocks
Without fail, every year there are January surprises.
They occur when investors receive a pop in selected stocks because of the way fund managers readjust their holdings to dress up their fourth quarter performance.
These improvements don't usually last very long.
In fact, most investors will see the affected stocks decline back to normal levels by mid- to late-January.
But for a few weeks, investors can earn a nice little return as the calendar begins the New Year. This hedge-fund effect will be of special interest to energy investors in 2013.
That's in stark contrast to last year when oil-related stocks were moving in one direction while natural gas stocks were moving in another. What's more, service companies were beginning to come off of their highs at this point in 2011, and King Coal was about to fall off a cliff of its own.
This time around, we have a fiscal cliff soap opera in the U.S., continuing credit concerns in Europe (although with a parallel rise in market optimism emerging on the continent), rising uncertainty again in the Middle East, and a simmering dispute between Japan and China.
In short, even ignoring the Mayans and their approaching December 21 deadline, there is no lack of concern in the market these days.
Still, there will be several beneficiaries in the energy sector as hedge fund managers make their moves over the next few weeks. This is likely to happen across several categories of companies.
In this case, investors would be wise emphasize two segments of the energy market that are currently on the rise: oil refineries and coal stocks.
2013 Natural Gas Forecast: Six Bullish Reasons Why Now Is The Time to Buy
Natural gas is developing into a very different market from oil, one that offers plenty of opportunities for investors to make big profits in 2013.
There are two contrasting dynamics when it comes to natural gas prices. First, the amount of recoverable volume has been accelerating, thanks to increasing unconventional (shale, tight, coal bed methane) reserves and technological improvements to extract it.
A rise on the supply side would generally reduce prices, especially if the number of operators continues to increase. More gas moving on the market from more suppliers results in a downward pressure on prices.
The second dynamic, however, is moving in the other direction, enticing the increase in drilling and expansion of infrastructure.
This factor considers the demand side, and there are at least six major trends colliding to increase the prospects for gas usage as we move through 2013.
As a result, I expect natural gas prices to see a 25% increase from current levels… here's why.
Get Ready to Play Higher Natural Gas Prices with These Picks
After natural gas prices hit a decade low in 2012 of below $2 per million BTU, they're up about 80% from a year ago, trading around $3.60 this week.
Looks like the six-and-a-half year bear market in natural gas maybe be coming to an end.
Falling with natural gas prices has been related investments. That means investors can go shopping now for low-priced natural gas plays before prices climb.
As Money Morning Global Energy Strategist Dr. Kent Moors said, the road to profits will not be straight up. Volatility will cut in both directions.
But the natural gas market is getting stronger.To continue reading, please click here...
The Brewing Shale Gas Energy Boom That Nobody is Talking About
While folks back in the U.S. were sitting down to Thanksgiving dinner, I was making my way back to Frankfurt, Germany from Warsaw, Poland.
My discussions in the Polish capital were with the PGNiG, the national state-run gas company and the government's designated partner in all domestic drilling operations.
Unlike my German conversations, there is considerable optimism these days that the energy picture in Poland is about to change in a major way-thanks to shale gas.
Poland must overcome a serious of challenges, which, of course, were the reasons for our meetings. And despite the upbeat tenor of everybody involved, significant concerns have emerged.
On the positive side, Polish officials have committed to a rapid development of unconventional gas. In addition, no domestic opposition to drilling exists, at least not yet.
Unlike back in Germany, nascent environmental movements have neither the political clout nor the apparent interest in making this an issue.
Polish operations are currently in a very early stage, which may be the reason for the lack of opposition. Only a few test wells have been drilled (less than 15 in all), and none are near residential populations.
For that matter, PGNiG is preparing to start its first horizontal drilling operation. The test wells thus far have all been spud by foreign companies.
However, it is now clear that the "rapid" ramp up foreseen by the authorities in the central government is not working out as anticipated back at the well sites.
For one thing, the initial wells have either come in dry or produced disappointing gas flows. For another, the national gas company is under considerable pressure to produce positive results in what is becoming a very challenging technical environment.
The former result is hardly surprising. There remains insufficient geology and preliminary field prospecting. The locations of shale deposits are well known. The country has no less than five very promising basins. But Mother Nature has an irritating habit of indifferently placing hydrocarbons in those basins.
That requires initial evaluations before the expensive proposition of sinking exploratory wells commences. Thus far, the few wells attempted have been positioned with little more than rudimentary data and guesswork. The poor initial results, therefore, reflect such considerations more than anything else.
There seems little doubt that there are considerable reserves, but finding where they are remains a major undertaking.
Here challenges exist that are not a problem back in the United States.
But solving them could lead to huge breakthroughs for companies in the U.S. and energy investors alike.
Keystone Oil Pipeline Decision Key to Obama's Energy Policy
One of the major policy decisions facing U.S. President Barack Obama is whether or not to approve the Keystone oil pipeline across the Canadian border into the United States.
If approved, the pipeline – to be built by TransCanada (NYSE: TRP) – would transport about 1.3 million barrels of oil a day from Canada's oil sands to refineries along the Gulf coast.
The Keystone oil pipeline, if approved, would benefit U.S. energy security. Not to mention TransCanada and players in the Canadian oil sands industry such as Suncor Energy (NYSE: SU).
This decision is one investors in the energy sector need to pay attention to as it will set the tone for energy policy in President Obama's second term.
The Path to Energy Independence is More Rocky Than It Seems
You might have seen yesterday's headline in the Wall Street Journal: "U.S. Redraws World Oil Map."
As the article explains, U.S. oil production is now on pace to surpass Saudi Arabia by 2020. This would make the United States world's largest oil producer. We're already the second-largest natural gas producer, according to 2010 EIA estimates.
It's all thanks to the U.S. shale boom that has unlocked billions of barrels of oil and trillions of feet of natural gas from the Appalachian Mountains to the Pacific Coast, from the Bakken in North Dakota to the shale fields of southern Texas.
But all of this fracking has caused some serious economic and environmental problems.
And while I greatly advocate increased drilling and domestic production, we still must address a wide-range of problems now plaguing the shale oil and gas sectors.
After all – with apologies to Voltaire and Spiderman – with such great fortune comes greater responsibility.
That's why I am in the third day of what has become a very interesting conference here in Pittsburgh. It was convened to set the agenda moving forward to deal with the almost invisible aspects of shale oil and gas drilling.
In fact, for the first time, the conference's primary focus will be on the negatives caused by the drilling.
We also have questions surrounding the amount of water required to frack these formations (the process needs a lot of water to break open rock and release hydrocarbons), as well as the ongoing public health fears from the chemicals used.
Now, we are seeing parallel economic problems as well.
In the Marcellus basin, researchers are now recording some of these shortcomings and placing them in four basic categories.
The real concern is that these four problems – in infrastructure, labor, local inflation, and the environment – will remain well after the drilling (and the revenue) has moved on.
So before you decide to declare "energy independence", take a look at some of the downside that may come along with it.
The Morning After: An Energy Shakeout, Then a Move Higher
As I mentioned yesterday in Oil and Energy Investor ("Something Big Hits the Oil Markets… Starting Tomorrow"), the primary problems today are exactly the same ones we had before the election.
In fact, aside from the Dems picking up a few seats in the Senate, the composition remains the same – one party controlling the White House and the Senate; the other with a majority in the House.
For all the criticism of Congress kicking the can down the street, that's just what the nation as a whole did on Tuesday night.
There will be no possibility of expecting a recovery in an environment of uncertainty about rising taxes and meat cleaver program cuts.
I'm calling this the financial precipice these days because I am tired of saying "fiscal cliff." But it is one of two things that have pushed the energy markets down, along with markets across the board.
The Real Energy Opportunity After Hurricane Sandy Is Logistics
Since the storm last week, I've seen a recurring, disturbing bit of advice surface on those cable news investment shows.
The pundits are hard at work prognosticating on what is likely to spike in the aftermath of Hurricane Sandy. They are peddling a belief that this natural disaster will produce shortages – and that those shortages can be exploited for a short-term windfall.
But this is a mistake.
In fact, this is one of the most persistent errors made by investors during such a period.
In the medium-term, however, there is sometimes a consequence of a hurricane or other disaster that translates into genuine opportunity. There is certainly one this time. And I'll talk about how to position for that in a moment.
First, we need to explore what you as an investor should not do right now…