Daily Profit : oil, natural gas

U.S. Set to Reclaim Oil Throne

Ian Wyatt — Tue, 15 Nov 2011 14:03:00 GMT

Here’s one bit of good news amid all the talk of European debt fears and high unemployment rates: The U.S. is about to regain its status as the world’s top oil producer.

So said Chesapeake Energy CEO Aubrey McClendon while speaking at the World Shale Gas Conference & Exhibition in Houston earlier this week. The reason? Shale oil.

Chesapeake and other energy companies are using new drilling technologies to unlock natural gas from shale-rock formations. With the demand for natural gas in the U.S. set to increase by 2 percent a year, according to McClendon, shale oil could propel America, currently No. 3 in oil production, back to the top of the oil producing heap.

McClendon said he expects the number of natural-gas powered vehicles to reach 16 million by 2035. Today that number stands at 145,000. Power plants and chemical producers are also upping their use of natural gas. McClendon believes that the U.S. could begin exporting natural gas by 2015.

ExxonMobil (NYSE: XOM), the world’s largest publicly owned oil company, is getting in on the shale oil act. The company said last month that it’s shifting its focus to shale oil drilling – in the U.S. and abroad. But shale drilling is much more advanced in the U.S., so production here will progress a lot quicker than places such as China or Poland.

And with Exxon leading the way, you can bet that the shale oil business is about to boom. That’s reason enough to believe McClendon’s assertion that the U.S. will soon be the world’s leading oil producer again.

For more articles from Wyatt Investment Research on oil, natural gas, commodities, and income stocks be sure to check out www.WyattResearch.com.

Coal Dominates

Ian Wyatt — Thu, 11 Nov 2010 13:03:00 GMT

Fellow Investor,

QE2 has unleashed a raging bull market for gold and silver. But the falling dollar is also pushing oil prices higher, too. Oil is zeroing in on its 52-week high. And oil stocks have been performing very well.

Now, as you now, I was recently at the Association for the Study of Peak Oil (ASPO) conference in Washington, D.C. The main reason I went was to see my friend and Energy World Profits editor Gregor Macdonald speak on the "Rise of Coal."

I will offer Gregor's perspective on coal later. First, I want to tackle some of the bigger issues of Peak Oil, the most important being that global oil production appears to have peaked in 2004.

This chart, from the September 22 issue of Energy World Profits shows the supply situation.

One of the most interesting observations from this chart is the supply response during 2007 when oil prices ran to $147. You might think that oil companies would pump as much oil as possible to take advantage of record high prices. I know I would...

In fact, oil companies probably did pump as much as they could. But it wasn't enough to match peaks from 2004 and 2005.

Again this year, we can see that supply has failed to increase as oil prices have moved above $80 a barrel. In fact, supply has been falling this year.

*****Many economists, investors and even oil traders have a tendency to use U.S. oil demand as the driving force for oil prices. From the April issue of Energy World Profits, Gregor wrote:

"To economists, oil analysts, and political scientists the conditions we face today, just five years later, would have seemed bizarre. And I don't refer so much to the financial crisis. No, I refer to the fact that oil now trades at $82.00 dollars during the worst recession since WW2. And not only is the recession the worst in size and scope, but it's the worst in duration also.

It would have been unthinkable to the Wall Street Journal, Foreign Policy Magazine, The James A. Baker Energy Institute in Houston, The Department of Energy, and many TV pundits that oil could be at $82.00 dollars in the aftermath of a financial collapse. In fact, it was indeed unthinkable to all those organizations and media outlets just mentioned--and they said as much, week after week.

As Dan Yergin wrote in 2005, only "above ground" factors could push oil higher in the years ahead. My comment: any 2005 roundtable on the future price of oil would have agreed that only an attack on Saudi Arabia could place oil at $82.00 dollars a barrel in the midst of a severe recession in the United States. After all, the United States with its outsized demand has historically set the price of oil. During a deep recession in the US, oil should be at $12.00 dollars, not $82.00. How did the US lose control, of the price of oil?

The controlling factor now in global oil prices are the five billion people in the developing world. They use less oil per capita and derive more utility from each barrel. Which is a good thing, as the global supply of oil is now unable to make a sustained response to higher prices."

*****Ever since the financial crisis of 2008, Americans have been plagued by the feeling that we, as a country, have squandered our surplus wealth and now are a nation in decline.

After all, driving a Hummer was a status symbol just a few years ago. But today, you'd probably get some dirty looks tooling around in a gas-guzzler like that.

On an individual level, Americans may feel as though we took asset prices (like houses) for granted and spent too much money and failed to save.

A similar situation exists for the country as a whole. But Gregor suggests that the root cause is energy prices...

"...the West, both in its private balance sheet and public balance sheet, is carrying very high debt levels that are marked to even higher nominal prices. There is simply not enough cheap energy to fund the type of very, very fast growth required to pay back this debt. And it’s no longer just a question of debt-saturation in the private sector, and impending private defaults."

"Economists who propose creating a lot more government debt, in order to fund stimulus, clearly do not understand that these new tranches of debt -- which, by the way, become someone’s savings when they purchase that debt -- cannot possibly be paid back given that the world has now reached a plateau in oil production."

*****Now we can easily see why the world is transitioning back to coal. The bottom line is that it's cheap. And as oil prices rise, and we continue to resist greater investment in renewable energy sources or even natural gas, the only way to maintain a profit margin and grow an economy is with cheap energy.

In the following chart, you can see the path that coal use is on. Gregor projects that coal use will surpass oil sometime in 2014.

*****If you don't have energy stocks in your portfolio, you should. Oil, coal, renewables, these stocks will only get more valuable as investors become more aware of the true energy situation.

In the Energy World Profits portfolio, we have a Chinese coal stock with a forward P/E of 4.5. We have a top wind power stock and a top solar stock. We have a pipeline MLP paying a 7.3% dividend. We have three of the oil stock in North Dakota's Bakken oil oilfield. And we're currently building a strong position in Canadian oil.

I don't mind telling you where Energy World Profits subscribers are investing. And if you decide you'd like to try a trial subscription to Energy World Profits, even better.

The only way to lose money with natural gas

Ian Wyatt — Wed, 09 Jun 2010 18:36:00 GMT

The Only Way to Lose Money with
Natural Gas
There's one natural gas investment you must avoid like the plague

Fellow Investor,

Earlier, I wrote to let you know that it is a great time to buy natural gas stocks. In fact, I'm devoting the next issue of Ian Wyatt's $100k Portfolio to the natural gas opportunity.

But I also need to let you know that not all natural gas investments are the same. In fact, there's one very popular natural gas investment out there that's virtually guaranteed to lose you money, every time.

Over the last 9 months, the price of natural gas climbed off the floor of $2.75 per thousand cubic feet up to nearly $4.25 today. That's a 55% gain. However, over that same time period, this widely held natural gas investment lost 27%.

But, how can that be? How can a natural gas investment lose value as the price of natural gas rises?

I'll tell you...

Not All ETFs Are Created Equal

By now, most investors are familiar with Exchange Traded Funds, or ETFs. ETFs are baskets of stocks or other assets that trades like a single stock. ETFs are usually created to give investors an easy way to focus on a particular sector like oil services or technology.

If you bought an oil services ETF like the Oil Services HOLDRS (AMEX:OIH), you'd have exposure to to many of the heavyweights in oil services, like Transocean, Schlumberger, Halliburton, etc.

Like a mutual fund, an ETF is a great way to focus on a particular theme, and still lessen the risk of owning an individual stock. But an ETF is easier to buy and sell than a mutual fund, and doesn't involve hefty fees.

It's easy to see why ETFs are popular. And ETFs are part of the $100k Portfolio strategy.

So, it might seem that the United States Natural Gas Fund (NYSE:UNG) would be a simple and effective way to profit from the rise in natural gas prices. But unfortunately, all the UNG is good for is losing investors' money.

The reason UNG loses money consistently has to do with its failed strategy of buying and selling natural gas futures.

But all you really need to know about UNG is: DON'T OWN IT!

If the price of the underlying commodity for the UNG, natural gas, has risen 55%, then why has the UNG posted a 27% loss in the same time frame? A failed buy and sell strategy, of course.

Safety in Numbers

At Ian Wyatt's $100k Portfolio, I put every stock I buy through a rigorous analytical process. I crunch all the numbers, I verify cash flows, I confirm earnings expectations -- and I give all to you in a comprehensive, easy-to-read research report. That way, you have the confidence to buy the stock or fund I'm recommending.

More importantly, you'll never end up owning a clunker of an asset the United States Natural Gas Fund.

Now, if you're interested in the outstanding opportunity that natural gas represents, then you should be sure to get the June issue of my $100k Portfolio. In it, you'll discover my top natural gas stock and how we're going to profit from it together. It's one of the top natural gas producers in America. And it's trading at an incredibly low valuation.

There's no doubt in my mind this stock will be a big winner as natural gas emerges as a primary fuel source in the U.S. And I'll be releasing my research report on this dynamic money-maker in the next few days.

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Good Investing,

Ian Wyatt
Chief Investment Strategist
$100k Portfolio

PS: You'll recall that healthcare about the only sector that didn't get hammered last year during the financial crisis. In fact, healthcare was the only sector--besides government--that grew during the crisis. With government run healthcare on the horizon the expansion is only just beginning the profits just starting. My new report (it's #3 above) gives you comprehensive research on two pharmaceutical companies set for big profits and you can get them only with Ian Wyatt's $100k Portfolio. And at $39 a year, you can start right now.

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PPS: My natural gas issue comes out next week and you don't want to miss it. Sign up to try my $100k Portfolio service today to get your copy of this special issue.

Click here to get on the list to receive the issue.

PPPS: Okay, last one: try my $100k Portfolio service for SIX FULL MONTHS risk free. If you like the service, great, just keep getting every issue, update, buy or sell notice and special report. If you don't like the service for ANY reason, just call or email my office and get a full 100% refund of your $39. It's really that simple.