What The Energy Stocks Are Saying
What are the energy stocks
saying? Let’s consider oil and natural
gas stocks.
Oil stocks
Although the price of oil is trading near its 10 year highs, the oil company
stock prices are not doing much. What does this mean? It means that the market
believes the high oil prices are temporary and will quickly collapse once the
geo-political uncertainty is removed and the US seeks to maximize oil production
in Iraq to pay for the war.
Natural Gas
Natural gas prices are also seeing multi-year highs, but these gas companies
are bucking the trend and are participating in the move up with the commodity.
Why is this? The supply of Natural gas, unlike that of oil, is not expected to
meet demand for an extended period of time–even after a successful end to a
potential war. To touch on this point, according to a recent article the Wall
Street Journal, this cold winter has unmasked the lack of supply in the
gas markets. And refilling the depleted reserves should keep gas prices high
through summer. Longer-term prospects for the price also point to continued high
prices, as recently drilled fields are yielding marginal returns.Â
Although we
can expect a pullback in the price of natural gas, and its companies, once a
potential war with Iraq is successfully concluded, natural gas will probably
turn back up in the long term. So what? Depending on the natural gas company,
there may be some buying opportunities for longer-term investment in gas
companies after a war.Â
Some of the safer bets to consider are XTO Energy
(
XTO |
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News |
PowerRating),
Kerr-McGee
(
KMG |
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PowerRating) and Ocean Energy
(
OEI |
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Chart |
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PowerRating)
