Natural Gas Prices
There's a worldwide race heating up to supply the world with liquefied natural gas (LNG) and right now the U.S. lags far behind.
But that's about to change, with the U.S. expected to go from 0% of global LNG exports today to 9%-12% as early as 2020.
Investors should get ready because certain natural gas stocks will surge along with the exports.
So far, only Cheniere Energy Inc. (NYSE: LNG) is allowed to export LNG out of the U.S. to both free trade and non-free trade agreement (FTA) countries- it hopes to begin exporting in 2015.
And Cheniere's stock has been on a tear since earning that approval.
When the DOE announced the approval of LNG exports from Sabine Pass on May 20, 2011, Cheniere was trading at $7.69. The stock soared over 30% that day, finishing at $10.04, and today trades nearly 301% higher at $30.82.
Now, investors have another chance to profit from an LNG company.
Once again the catalyst will be approval from the DOE to export LNG to non-FTA countries.
And a non-FTA permit is the key with LNG exports.
Natural Gas Companies Attempt to Make Fracking Safer
Hydraulic fracturing, or fracking, is the most important energy industry development in the past few decades, unlocking value for U.S. natural gas companies.
Its extensive use in the United States is completely reshaping the world energy scene.
But there is one question that lingers over the U.S. energy industry: Is fracking safe?
One of those saying fracking is 100% safe is sometimes controversial oil billionaire T. Boone Pickens.
Natural Gas Prices Could Triple – And So Could Your Profits
Natural gas prices are finally turning around, hitting multi-month highs - and piquing the interest of legendary investors who say the commodity has a lot higher to climb.
While most commodities are moving lower in price - some quite sharply - natural gas has soared in 2013.
The June natural gas futures contract on Monday settled at $4.392 per million BTU, putting it up 31% so far this year. This makes natural gas the top performer among the 24 commodities in the Standard & Poor's GSCI index.
Noted contrarian investor Jeremy Grantham of GMO Asset Management is among the natural gas bulls. He recently told a value investing conference in Toronto that investing in natural gas at today's low prices is a no-brainer.
The Best-Performing Commodity of 2013 is Just Heating Up
Gold and silver are in the midst of an ugly selloff, but the best performing commodity of 2013 continues to ramp up.
Believe it or not, it's natural gas.
After increasing 1.2% Wednesday, natural gas prices now stand around $4.20/mmbtu- up more than 120% from a year ago and almost 30% this year alone.
The good news for natural gas investors is that there are still plenty of reasons why natural gas will continue its recent run.
Why I'm So Bullish About Natural Gas
I just arrived in Texas yesterday for my latest round of oil meetings.
The crude market continues to absorb accelerations in investment despite of some lateral price movements. That will be an important topic of discussion.
But my interest has moved in another direction.
Natural gas futures closed on the NYMEX on Thursday $4.14 per 1,000 cubic feet (or million BTUs). We have not seen prices reach these levels in quite some time.
Why Oil Prices Aren't Coming Down Despite Big U.S. Oil Boom
But while U.S. oil production continues to rise, and gasoline consumption continues to fall, gas prices have remained stubbornly high: The national average was about $3.65 last week.
And that trend is expected to continue, with the United States surging past Saudi Arabia as the world's largest producer of crude oil as soon as 2020. Meanwhile, U.S. gasoline demand is at its lowest in more than a decade - down to 8.7 million barrels a day.
Facts like that have led some pundits to predict falling oil prices. Last year, some politicians were promising that stepped-up U.S. oil production could lower gasoline prices to $2.50 a gallon.
Frustrated U.S. drivers struggling to cope with high gas prices were eager to believe such promises, no matter how unlikely.
Unfortunately, all that new U.S. oil, while helpful in some ways, will not have much effect on gas prices - either now or in the foreseeable future.
"The problem is that prices are not just reflective of new supplies, either too much or too little," explained Money Morning Global Energy Strategist Dr. Kent Moors. "By focusing only on how much is there, these analysts provide a fundamentally distorted view of the oil market."
Why Japan's Desperately Seeking U.S. LNG
The Fukushima nuclear disaster has had a dramatic impact on the country's nuclear industry - and that's opened the door for major developments for liquefied natural gas (LNG).
You see, two years after the Fukushima nuclear disaster in Japan, only a few of its more than 50 nuclear power plants have been restarted.
Before the nuclear disaster, Japan had relied on nuclear energy for 30% of the country's electrical power and had planned to increase that to 40%.
Now, the lack of nuclear power has left a big gap between demand for energy and supply.
That's why Japan has sharply increased its imports of liquefied natural gas. In fact, it's now the world's largest buyer of LNG.
In 2012, Japan imported a record 87.31 million tons of LNG, an increase of 11.2% from 2011. It imported LNG from sources including Qatar, Russia, Australia and Indonesia.
The LNG industry has reaped huge gains from Japan's surge in LNG use - and the industry stands to gain much more in coming years.
The Best Way to Invest in the Natural Gas Rebound
Today, let's talk about how investors can make some money off this.
As gas prices inch toward $4 per 1,000 cubic feet (or million BTUs) on the NYMEX futures market, we need to remember that this is not going to be either an accelerated rise or one that will be without volatility.
For reasons mentioned on Friday, gas prices will likely cap out in the mid-$4 range by the time we reach midsummer.
That means there are not going to be any across-the-board influences raising the entire sector. This is going to require some patience and selective investing.
So how does one structure an approach to this?
Five Reasons Why Natural Gas Prices Will Continue to Rise
Not long ago, the market was laboring under expectations that the NYMEX futures contract for natural gas would remain at around $3 per 1,000 cubic feet (or million BTUs).
The pundits were proclaiming that a surplus of shale gas, over production, and historic storage surpluses translated into long-term discounts in natural gas prices.
Last year's historically warm winter over much of the U.S. had not helped the price either.
While this year the weather is more seasonal, there are other factors in the price rise. For the investor this means there will be plays developing in specific areas that were simply nonexistent six months ago.
Make no mistake, we are not about to go back up to the $12 plus levels experienced a few years ago. Those days may be gone forever - one of the tangible impacts of the unconventional gas revolution (shale, tight, coal bed methane). There will still be volatility in this sector as the ongoing balance between extraction potential and well counts works itself out.
But we are likely to move into a manageable pricing dynamic.
And that means for investing in gas - with apologies to Sherlock Holmes - the game's afoot!
Why This Chinese Company Is Investing in U.S. LNG
A private energy company based in China is reportedly investing in the construction of a network of liquefied natural gas (LNG) fueling stations in the United States.
According to a Reuters report, ENN Group Co. Ltd. is teaming with a small U.S.-based company, and the partnership plans to open 50 to 60 LNG fueling stations this year. LNG stations cost an average about $1 million each to build, industry experts say.
ENN has already built a number of natural gas fueling stations in China, which is much further along in use of LNG for heavy trucks than the United States.
LNG's been promoted by investors such as T. Boone Pickens and natural gas producers including Chesapeake Energy Corp. (NYSE: CHK) as a cheaper, cleaner fuel for long-haul trucks.
Now more natural gas companies are teaming up to provide LNG, which means more investment opportunities for energy investors.