Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

What’s in Store for Natural Gas and Crude Oil Prices

Commodities / Natural Gas Sep 03, 2014 - 01:27 PM GMT

By: Money_Morning

Commodities

Kent Moors writes: To hear some analysts tell it, geopolitics and the weather are exogenous events when it comes to energy prices.

That is, somehow both natural gas and crude oil prices would operate quite “rationally” if it weren’t for either of them.

According to these guys, supply and demand is what drives the market, and from time to time these “outside elements” only muddle things up.


Well, I hate to break it to them, but there hasn’t been a “normal” market for some time now.

To assume that Mother Nature dumping snow, Vladimir Putin misplacing his army somewhere in Ukraine, and/or the Middle East falling into chaos are just one-off occurrences is simply not rational.

That type of thinking can be costly. Plain and simple, when investors disregard the weather, the geopolitical, or both, they lose money.

So as we begin the fourth quarter, I’m going to handicap where energy prices are likely headed with these two overriding factors in mind.

The real wild card will undoubtedly be crude oil prices….

Where Crude Oil Prices Go From Here

When it comes to crude oil prices, geopolitical events will have the widest sway.

Despite the fact that North America is rapidly approaching self-sufficiency, thanks to tight and shale oil reserves, oil remains in an integrated global market.

As such, events abroad will still impact U.S. prices regardless of how much more oil is added to the domestic market from local drilling. And remember, the cross-border trade in oil is also directly affected by flows from both ends (the raw crude produced and the processed volume). U.S. refineries just happen to have become the largest exporters of refined oil products in the world.

As a result, crises situations will continue to weigh upon the oil market, even here at home.

As it stands, the crises in both Ukraine and Iraq have been discounted by traders because of the time of year and the adequate supply. Traditionally, August and September are the months when oil demand lags.

Even the unraveling in Libya, and the cut-off of its supply, hasn’t been enough to send oil prices higher.

This will certainly change, but absent a major geopolitical collapse I just don’t foresee a rapid jump in crude oil prices. The key here, however, is what I see as the pricing floor.

As I write this, West Texas Intermediate (WTI) is trading in New York at about $96 a barrel; Brent in London at $103. Those levels will likely be the low price through the first quarter of 2015, while the average will likely be closer to $100 for WTI and $106 for Brent.

As for the “standard” market pressures, global oil supply is currently adequate. Yet, should we start to see the projected demand increases expected by OPEC, the International Energy Agency (IEA), and the U.S. Energy Information Administration (EIA) kick in toward the end of the year, there will be some rather noticeable international regional pricing differentials in the oil market.

This won’t be because we are running out of oil. I can’t emphasize that enough.

Instead, the difference will be caused by the premium certain regions – such as Asia and West Africa (for oil products) – are prepared to pay for needed volume.

Now in these situations, which occasionally do turn into actual supply constrictions, oil trading tends to push up the cost of futures contracts, reflecting the higher prices registered in selected expanding markets.

Remember, contracts in “normal” market trading reflect the expected price of the next available barrel of crude. On the other hand, contracts in “uncertain” markets tend to take their bearings from the expected price of the most expensive next available barrel. This uncertainty will manifest itself in cycles over the next several months.

So all told, on average oil prices have likely formed a base at about where we are now, but will experience periods of higher pricing due to geopolitical events.

Bracing for Another Long Cold Winter

As for prices in the rest of the sector, that’s where the weather comes in – especially in terms of natural gas.

From the standpoint of temperatures, this winter is likely to be about the same as last year, according to most estimates, although snow falls in New England should be less than last year but heavier in the Mid-Atlantic. Prolonged frigid snaps will undoubtedly keep demand higher in most regions of the country.

That means we can expect U.S. natural gas prices to be between $4.20 and $4.45 per 1,000 cubic feet given a slight increase in overall demand. And as more electricity is generated from gas, that will also contribute to a higher pricing floor.

However, the regional differences will be more pronounced than in recent years. Given the continuing pipeline and distribution problems, prices will be higher in New England than in 2013, with some concerns already expressed for a possible regional shortfall in propane.

In Europe, you can add the geopolitical to the mix, as the likelihood of a continuing Ukrainian crisis will test the ability of Europe to sustain imports of full natural gas consignments from Russia. But the knock on effect for North American gas prices from Gazprom’s European exports will be limited.

On the other hand, 2015 will see the inauguration of significant liquefied natural gas (LNG) exports to both Europe and Asia from the U.S. That will be the start of a fundamental realignment of energy trading routes to the continent, but not until later next year.

Meanwhile, coal prices will actually improve in specific areas of the U.S. (especially the Appalachian basin), where it remains the primary source of power and heat, and metallurgical coal exports will continue to rise to the level of exporting ability. Both of these will allow specific coal production and distributional limited partnerships to improve in value through the first quarter of next year.

However, inferior coal grades in the Western U.S. will experience declines in both demand and prices. That may actually improve the overhead at regional power plants, but it won’t create resurgence of coal use in electricity generation.

Rather, the improving value of utility stocks will be confined to those with the ability to source from coal, gas, nuclear, renewables, even biomass and geothermal. The expense of long-distance lines will be picking up, so those utilities that produce much of their bottom lines from distribution may see lower returns as operations and overhead take a bigger bite out of revenues.

So, the world is hardly coming to an end. But it is likely that the energy needed to run it all will continue to increase.

The good news is the cost the raw materials will continue to be a manageable factor in the overall economic expansion, regardless of what happens in an American off year election.

Given this scenario, the success of your energy portfolio will revolve around the careful selection of individual companies, partnerships, and exchange traded funds (ETFs). And as we move into the end of the year, I’ll be certain to keep you informed on the best way to position your portfolio.

Source : http://oilandenergyinvestor.com/2014/09/whats-store-natural-gas-crude-oil-prices/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 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