Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

How to Profit from Seasonal Energy Cycles

Commodities / Energy Resources Jun 21, 2013 - 10:33 AM GMT

By: The_Energy_Report

Commodities

For short-term traders, understanding cyclical markets is the key to profits. And with the hottest summer months ahead, natural gas could get a price boost when air conditioners start to hum, says Roger Wiegand, publisher of the Trader Tracksinvestment newsletter. In this interview with The Energy Report, Wiegand shares some promising names for investors who are ready to read the technical charts—and mark their calendars.

 

The Energy Report: How are the supply/demand fundamentals playing out for North American energy resources?


Roger Wiegand: Fortunately, supply is strong. The U.S. has substantial reserves of natural gas and oil. Shale gas in West Texas is a big, wide new program. The Bakken region in the Dakotas and Eastern Montana sports 7,000 producing wells. Because domestic oil and gas production in the U.S. is increasing, we are buying less petroleum from the Middle East, much to the chagrin of the dominant forces there.

 

The big oil producers in the Middle East want to hold the Brent price, which is worldwide oil, at around $100 per barrel ($100/bbl). In the U.S., the floor price for West Texas Intermediate (WTI) is $85/bbl. Oil production is up 10%, which normally would push the price down. But the increase in supply is offset by inflation within the energy sector. Oil could go as high as $110–115/bbl before the end of the year.

 

The price of oil is tied to security-based fears. Things are ugly in Syria and Turkey right now. The oil price in the U.S. could increase in response to fear of war or increasing turmoil in the Middle East. When things really get scary, as they did in Afghanistan and Iraq, there is often a $10/bbl premium in the oil price, which is a lot.

 

TER: Is the oversupply of gas in the U.S. an opportunity for export?

 

RW: Exporting liquid natural gas (LNG) with ships is very expensive. But shipyards in South Korea and Europe are actively building LNG-carrying vessels. The primary buyer of LNG is Japan. Japan overreacted when it shut down its 25 nuclear power plants after the tsunami. The price of electricity went through the roof. When I was there last year, the temperature in office buildings was kept at a toasty 80 degrees. Japan needs to turn to LNG across all of its energy fronts. Some of its nuclear power was turned back on, and it has old plants that run on coal. Electricity generation from coal is leveling off, though.

 

For a while, China was starting up a new coal-fired power plant every week. That is a stunning fact, but it reflects just how much power the Chinese economy requires. A lot of these plants operate with no environmental protection restrictions. Consequently, the air and water are terribly polluted in industrial and urban areas of China. But the government is doing the best it can to stimulate the provision of electricity from a range of resources: wind, solar, coal, nuclear and natural gas.

 

TER: Let's focus on opportunities in the junior oil and gas sector. What promising names do you have for us today?

 

RW: New Zealand Energy Corp. (NZ:TSX.V; NZERF:OTCQX) is a good company. Its price recently backed off because after three major drilling expeditions performed well, the company's share price went up tremendously and investors took profits. But the company is well funded and it controls important reserves. We advise holding on to New Zealand Energy, because the price is likely to go back up.

 

We recently found a solid petroleum service company in the Calgary region of Canada, Enterprise Group Inc. (E:TSX.V). It is a pipeline and construction company that provides equipment and services to regional oil and gas drillers. It was formed from a combination of three smaller companies and management has plans to expand. Keep in mind that Enterprise Group is not exploring, which can be risky. Enterprise is a pick and shovel operation and its business is very steady. If one element of its trade slows down, the other two revenue sources can pick up the slack. It had tremendous new net profits on the last report. The managers are very sharp guys. I spent an hour with them and I was very impressed. We recommended Enterprise Group at CA$0.60. The floor is CA$0.20. The intermediate price is about CA$0.45, but the current price is way above that based upon good performance.

 

TER: Do you think holding onto a company is a good way to hedge against cyclical downturns in the energy markets?

 

RW: A diversified company that performs really well is worth hanging onto it as a long-term investment. However, we are not long-term investment recommenders. I encourage people to trade if they have gained or lost a sizable amount in a stock. Of course, some folks just do not want to trade. They want to hold onto a stock for 10 or 20 years. But those who want to trade need to understand how the cycles work in the shorter term. For example, commodities generally go higher into the fall before selling off. A trader who watches the charts will take profits before the fall selling event.

 

I still read the old Jesse Livermore books—his investment psychology is excellent. His attitude is that a trader should not be in the market all the time. He can pick his spots and go for the best, either long or short. Personally, I have not had a lot of luck trading short, so I do not do it, and I stopped recommending it. We have had good luck with call options in the right time of year, however. But a word of caution: If you do not have the technical expertise to deal with puts and calls, do not try to do it at home.

 

TER: Is it wise for junior investors to put together a large portfolio under the assumption that some percentage of them will pay off over time?

 

RW: I advise being selective: pick a handful of good stocks with the right fundamentals and technicals. Buy and sell them in sync with the seasonal cycles for each industry.

 

TER: What other oil and gas service industries are out there?

 

RW: In a word: railroads. The Keystone pipeline has been delayed, but there is still a pressing need to transport oil and gas from the Bakken region to petroleum refineries at the Gulf of Mexico. A lot of that oil is being moved by rail. It costs more money to transport by rail, but overall it is economic right now. A big refiner in Texas, Valero Energy Corp. (VLO:NYSE), recently announced its intention to own a fleet of 12,000 rail cars by 2015. And in 2009, Warren Buffett bought the Burlington Northern Santa Fe railroad, which transports oil by tank car. Buffet does not want to see the Keystone Pipeline built because that would ruin his tank car business.

 

With so much oil and gas drilling in Canada and in the U.S., the service sector is where we are seeing major growth. The drillers need exploration backup, pipes, general servicing and hauling—all the things that allow the drillers to drill. Even some of the largest firms like Exxon Mobil Corp. (XOM:NYSE) buy specialized services, as it is cheaper to outsource than to create internal capabilities to do these types of jobs.

 

TER: What do you think about the future of coal in North America?

 

RW: We have liked coal for a long time. Environmentalists have tried to prevent construction of new coal-fired power plants in the U.S., and generally they've been successful. But we think that energy sources for the U.S. should include every type of energy. Coal still supplies 40–45% of all power produced in the U.S. Some plants are better than others. Clean coal can be done, although it costs a lot. Some utilities find it more economic to convert coal-fired plants to operate using natural gas.

 

TER: What's the future of nuclear energy in the U.S.?

 

RW: There is a future for nuclear in North America, but it is darn slow. It takes 12–15 years to even get a permit to start up. Fifteen years is a long wait. Some of the old reactors are ready to be shut down because it costs too much to repair and update them.

 

TER: Please sum up the state of the energy market for short-term investors.

 

RW: The energy cycle doldrums do not last very long. For example, natural gas usage goes up dramatically in July and August on air conditioning demand. And many of the coal-fired power plants in the U.S. that were converted to natural gas cannot be reconverted, because it costs too much money. So the utilities are increasingly dependent on burning natural gas, which was trading way under $2 per thousand cubic feet ($2/Mcf), and now it's up to $4/Mcf. It is headed toward $5/Mcf this year. Now is a good time to trade in that seasonally popular commodity.

 

TER: It was good talking to you, Roger.

 

RW: Thanks, Peter.

 

Roger Wiegand produces Trader Tracks to provide investors with short-term buy and sell recommendations and give them insights into political and economic factors that drive markets. After 25 years in real estate, Roger has devoted intensive research time to the precious metals, currency, energy and financial markets for more than 18 years. He creates a weekly column for Jay Taylor's Gold, Energy & Tech Stocks newsletter.

 

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

DISCLOSURE: 
1) Peter Byrne conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report: New Zealand Energy Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Roger Wiegand: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

 

Streetwise – The Energy Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

 

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

 

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

 

Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.

 

101 Second St., Suite 110
Petaluma, CA 94952

 

Tel.: (707) 981-8204
Fax: (707) 981-8998

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules