Natural Gas Prices

The energy boom has made investors a lot of money over the past few years. Now we’re about to see the next leg of the energy boom have a big impact on natural gas.

As you can see in the chart above, natural gas prices have had a volatile ride. An extremely hot summer, a very cold winter, and major hurricanes can wreak havoc on natural gas prices.

That volatility has kept a lot of investors away from natural gas stocks. But once you sort out the volatility, it’s a long-term uptrend for natural gas prices. Natural gas prices have gone from below $2 per Mcf to above $8 per Mcf excluding a few very short-lived price spikes.

Yesterday, I was traveling across Alberta and Saskatchewan looking for the next big opportunities. And for a long time I’ve been doubting the efficiency of oil sands because it costs between $40–50 to produce a barrel from the extremely heavy oil.

And you know what? Producing the stuff might make sense economically, and it might not. However, oil companies are expected to pump $90 billion over the next eight years into oil sands projects. That’s going to create a big demand for natural gas. That’s because the oil sands have to be “cooked” in order to separate the oil from the sand.

The cooking process is driving natural gas demand to more than triple due to the multiple oil sands projects. The oil sands producers are going to go from using about $4.2 billion worth of natural gas last year to more than $13 billion by 2015.

The current weakness in natural gas-producing companies can’t last much longer. Now is the time to buy natural gas stocks.

Good investing,

Andrew Mickey
Editor in Chief, BreakAway Investor

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