This excerpt appeared this weekend in Barrons...
Bob...
It's 17 degrees outside, and the snow is falling as relentlessly as the stock market. Reason enough to start ruminating, once again, how eminently useful are those natural resources, oil and gas. Truth be told, we haven't found an Internet stock yet that could keep our feet warm.
The price of these critical commodities -- like most commodities -- is in the pits. Sure, in recent weeks oil has bounced a couple of bucks -- last time we looked, it was $12 a barrel -- but that bounce, remember, came off a 12-year low. Natural gas, too, has ticked up a tad -- but at $1.80 or so per mcf (thousand cubic feet), nobody, but nobody, is laying out big exploration bucks to find more of the stuff.
Both oil and gas stocks look awfully cheap. But what makes natural gas particularly intriguing -- both to us and to a very smart portfolio-manager pal of ours -- is that it's relatively a local affair (what gas we use here is produced in good ol' North America), and second, that the line between glut and shortage is so surprisingly thin. In other words, it doesn't take much for a pop.
Right now, of course, there's supposed to be a glut. After last year's unprecedented warm winter and a relatively mild November and December, there is, to be sure, more natural gas in storage than a year ago. But depending on whom you ask, the actual excess inventory is a mere one- to two-week supply. Virtually nothing when new exploration is grinding to a halt.
As our friend Bob (who's rich, smart and publicity-shy) puts it, "Below $2, drilling for gas in the U.S. simply dries up."
Even as deliverability wanes, underlying demand -- forget for a moment the swing factor of weather -- from both electric utilities and consumers is rising, steadily and inexorably. |
