Natural Gas is Looking to Soar

Crude continues to hit record highs every day. When will it stop going up?

No one knows- but eventually it will.

But crude isn’t the only energy commodity that is rising. Natural gas is at three year highs and is moving higher. Despite what most people think, natural gas use has two “peak” periods during the year.

Obviously, the first is the winter as people use natural gas to heat their homes. The second is the summer, when people also use natural gas to run their air conditioners.

Normally, in the spring and the fall, inventories of natural gas build. But this spring that didn’t happen. The winter was longer than expected and many people were running their heat a lot longer.

Inventories actually plunged during the spring.

We’re going into the summer air conditioning season without much supply.

Low supply + high demand = HIGH PRICES

Is it too late to invest in natural gas stocks?

The exploration and production companies have seen huge upticks in the recent month. Many are trading at 52 week highs. Here are a few:

Apache (APA)
Devon Energy (DVN)
Encore Acquisition (EAC)
Stone Energy (SGY)
Anadarko Petroleum (APC)

Many of the exploration and production companies are trading at 2008 P/Es of under 15, which would make them pretty cheap- especially with growing earnings.

None of the explorers have reported earnings yet. But with natural gas prices surging over last year, their numbers should be much better than 2007. Their earnings are also backward looking. In the current quarter, natural gas (not to mention crude prices) have soared even higher.

It’s not too late to own the exploration companies. But the prices won’t soar forever. At some point crude WILL pull back. As will natural gas.

For now, the natural gas bull appears to be picking up steam.