342% gains from natural gas implosion
Today's Financial News - Posted November 10, 2009
Finally, the world’s experts are confirming what I have been shouting for months. Natural gas prices are way too high.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Two years ago, most investors said this would never happen. Even twelve months ago it looked improbable. But today it has happened and it should change the way you look at the energy markets.
For nearly two months, I have been troubled by the situation brewing in the nation’s natural gas industry. Too much supply and not enough demand has created a recipe for disaster.
But most investors disagreed.
How many times have I heard the talking heads state that if oil prices are rising, natural gas prices must rise as well? It has been a common investing theme for as long as I remember. For the most part, it worked.
Until now.
Thanks to massive gains in drilling efficiency and technology, the United States now has more natural gas at its pumping disposal than ever before.
According to reports out of the International Energy Agency (IEA) this morning, it is going to create great downward pressure on future natural gas prices.
As supply eclipses demand, prices will plummet.
I told you so
Across the globe, the IEA believes power generation and industrial natural gas demand will drop 3%. It will bounce back next year, increasing by an average of 2.5% from 2010 to 2015, but supply is still expected to outpace demand until late next decade.
Yes, next decade.
With massive amounts of natural gas flooding domestic markets, falling prices are the most obvious variable in the equation. What many investors are not looking at is the recent preparations for natural gas imports.
Remember, just a few years ago the markets were expecting a strong natural gas shortage here in the States. They quickly developed and implemented plans to create massive LNG offloading and storage terminals.
Now, they are hard pressed to find any LNG shipper that can deliver a boatload of gas at today’s prices. It is far cheaper to pump natural gas from Ohio, West Virginia or Pennsylvania than it is to top off a tanker in Kuwait, ship it across a couple of oceans and unload along the Texas coast.
That is not good news for the nation’s LNG import business, which was just getting started.
Going the wrong way
One company I have been watching quite closely is Cheniere Energy (AMEX:LNG). The $116 million company is developing LNG terminals on Louisiana’s Sabine Pass.
Instead of telling you my opinion of this speculative play, I will give you the market’s opinion.
It isn’t good.
Since March, when shares of most everything doubled in value, Cheniere’s share price fell from $5.00 to just $2.06 at the moment. Almost every day, the price is going lower and lower.
Thanks to word like we got from the IEA the trend is not likely to end anytime sooner.
That is phenomenal news for TFN Strategic Trader subscribers. I made them aware of the situation almost a month ago and advised them to buy a very specific set of puts.
Since then, the value of those puts has risen by over 30% and is about to go even higher as the underlying shares are down by nearly 2.5% so far today.
If you think those gains are nice, how would you like to bank gains of 342%? That’s how high another set of calls have climbed since I warned about the natural gas industry’s impending doom.
This trend is just getting started. In fact, I believe we won’t see the real action until mid-January, when the market finally realizes it made a massive mistake.
If you want to get in on the action, read my exclusive report here.
Next Article: An irrational market’s dangerous celebration
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