Frank, note the crude oil price quotes in Europe today--down about $2. The reason appears to be an OPEC decision to provide more supplies to the Middle East, contemplating additional purchases there by the U.S. military, combined with fear of worldwide recession.
In my view, crude oil prices running between $20 and $25 won't break most companies, but will benefit the industrial economies by making possible lower prices for a key energy source and feedstock. This in turn will act like a sudden injection into the slumping economies, by freeing up more funds for consumer spending or business investment. Natural gas prices, however, don't necessarily follow crude oil, since they appear to be much more oriented to local conditions (e.g., available pipeline capacity, domestic/off shore supplies, etc.) And of course, natural gas in the U.S. market is also weather dependent.
This brings us back to CHK, which I think is an interesting hedge, both on natural gas prices and an economic recession. One need not expect the huge profits from last year to justify a higher price than currently quoted.
Art |
