But before I do that let's talk quickly about today's drop in crude oil and natural
gas.
Crude, Natural Gas Futures Dip
Crude and gas prices have been increasing steadily over the past few days. Especially because of the cold wintry weather experienced in the U.S. Northeast.
But that's not how it turned out today.
Today NYMEX crude oil and natural gas fell for a second day on forecasts that warmer weather will reach the U.S. after Christmas.
Temperatures in the northeastern U.S., including in my hometown of Baltimore, have been below average for much of this month. However, over the past couple of days temperatures have been relatively mild.
Natural gas has plunged over 10% from a record of $15.78/Mcf set only two days ago.
Take a look:
But if I were you I wouldn't expect this to be a continuing trend.
Sooner than later the real winter weather is going to hit and hit hard. Once this happens you can definitely expect natural gas prices will go right on back up and break more records.
It's All about the Warmth
It was two or three months ago I was talking to Mike Schaefer on the phone about something I've now completely forgot about.
However, I do remember asking him where he thought natural gas prices were going to go this winter. Here's what he told me.
"Son," he said in his grizzly voice, "Have you got yourself a girlfriend?"
"Well, yeah, Mike, but what's that got to do with gas prices?" I asked.
"Well get yourself another one," he said "Because unless you want to pay through the nose for heat, you'll need two to keep warm."
That was all he needed to say to tell me that we were in for some trouble (By the way, I'm still trying to work the two girlfriend thing out)
You know…I love it, and I hate it, that he's been dead on.
I love it because all the other so-called analysts have been saying energy prices were bound to drop. And they were dead wrong and Mike's been dead right.
Now I hate it because my lack of a polyamorous relationship has cost me.
The gas and electric bill at my house has increased over 162% from $141 to $370 over one month. Take a look if you will:
Certainly not a pretty picture.
And if you take a closer look you'll see that over 68% of my bill's total comes solely from natural gas commodity. That doesn't even include the delivery service.
Yeah, I showed her the bill and explained Mike's solution.
But it's still a no go.
Oh, It's Not Over Yet
It's only going to get worse.
On Tuesday the International Energy Agency raised its forecast of fuel demand growth.
The IEA said world oil demand will climb 2.2% next year, compared with the 2% forecast a month ago.
Energy analysts say that home-heating demand in the U.S. Northeast, where 80% of the nation's heating oil is used, will be 17% above normal through Dec. 19.
Home-heating demand in the Midwest is also expected to be 9% above normal over the next week
On top of that the Energy Department's weekly natural gas report showed that inventory fell 202 billion cubic feet to 2.96 trillion cubic feet last week.
So here's a little economics 101 problem for you.
Natural gas supplies fell. Natural gas demand is on the rise. What should happen to the price for natural gas now?
Bingo…you pass.
We can certainly expect natural gas prices to increase over next week.
And for homeowners and those of us involved in monogamous relationships, that's bad news.
However, this is great news for anyone who has positioned themselves in energy stocks.
In fact, Mike told me yesterday that his Pure Energy Report portfolio, which consists of 27 energy stocks, is already up an average of over 40%, with a 92% success rate.
He even told me 5 of his stocks are up over 100%!
How does he do it?
I only wish I knew.
- Luke Burgess
