The price of electricity is soaring in Europe...
The culprit is the war in Ukraine, as you might expect. Most of Europe has sided with Ukraine against Russia. Now, Russia has stopped supplying natural gas to Europe's main pipeline.
European natural gas prices have surged more than 200% since June. One of the worst-hit countries is Germany... Its electricity costs are up nearly fivefold in 2022.
The increases in the U.S. haven't been as severe. Natural gas has merely doubled here. And the price has come down about 20% in the last three weeks.
That's a welcome sign as we head toward winter. But I've got some bad news...
Natural gas prices are nearly certain to head higher from here. And they'll likely hit decade-plus highs just when we need this commodity most.
Let me explain...
Certain commodities move like clockwork.
The same forces drive supply and demand for these assets predictably throughout the year. As a result, they create remarkably consistent seasonal trends.
Natural gas is a perfect example. We use it to generate heat and electricity... And we need a lot more of both during the fall and winter.
Everyone knows this. It happens every year. So we stockpile extra gas to fill that additional seasonal demand. Nevertheless, prices tend to increase as we head into winter.
Specifically, natural gas prices tend to rise the most in September and October. Take a look...
This data looks at the last 30 years of natural gas prices. And you can see the clear seasonal trends...
Prices tend to fall at the beginning of the year. They rise a little in the spring, before falling in the summer when demand is low. But then, just as we ramp into "busy season," prices see their largest spike of the year.
The typical gain in September and October is nearly 20% combined. But the returns could be even higher this time around.
That's because current natural gas stockpiles in the U.S. (minus Alaska and Hawaii) are 8% lower than last year. And they're a full 24% lower than the same point in 2020.
In fact, the last time stockpiles were lower at this time of year was 2018. And look what happened to natural gas prices back then...
Natural gas rallied 63% from its September 2018 low through the November peak. That rally was a little longer than usual. But that was likely a result of low stockpiles heading into fall.
We're in the same position today. Prices have fallen recently, so folks in the U.S. are breathing a sigh of relief. But you shouldn't expect the low prices to last for long.
According to history, natural gas prices are about to begin a seasonal boom. And it's possible that they could rise 20%, 30%, or even 40% in the coming weeks... hitting a decade-plus high along the way.
That's not good news for consumers... But it could help wrap up an already fantastic year for energy stocks. So for investors, energy continues to be a smart bet right now.
Good investing,
Brett Eversole
P.S. Today's energy crisis is much bigger than seasonal trends. We've been heading down this path for years... And prices can spike much higher from here, despite what Wall Street expects. But as I shared in a recent update, you can profit from what's happening...
The opportunity in energy stocks could help you protect your hard-earned wealth, thanks to an overlooked story that's unfolding now. You can still get the details for a limited time, right here.
Further Reading
"In just three years, the U.S. fracking industry will have made back a decade of losses," Brett explains. This shift is happening for two specific reasons – and it means the energy industry is set to make more money than at any other time in history... Learn more here.
Oil prices will likely stay high for years. No one likes to pay more at the gas pump – but as investors, this situation is giving us a huge opportunity... Read more about the forces driving this boom here: Why $100 Oil Is Here to Stay.
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
ICICI Bank (IBN)... financial services
Progressive (PGR)... property and casualty insurance
Sarepta Therapeutics (SRPT)... biopharmaceuticals
BJ's Wholesale Club (BJ)... bulk retailer
Ulta Beauty (ULTA)... makeup and skin care
e.l.f. Beauty (ELF)... cosmetics
Turquoise Hill Resources (TRQ)... copper
Frontline (FRO)... oil tankers
First Solar (FSLR)... solar energy
AES (AES)... utilities
Waste Connections (WCN)... trash and recycling
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Intel (INTC)... chipmaker
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Rogers Communications (RCI)... Canadian telecom
GSK (GSK)... pharmaceuticals
Logitech (LOGI)... electronics
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Church & Dwight (CHD)... household products
American Eagle Outfitters (AEO)... apparel
Freshpet (FRPT)... healthy pet food
Scotts Miracle-Gro (SMG)... plant food and cannabis
XPeng (XPEV)... electric vehicles
Toyota Motor (TM)... automaker
Comcast (CMCSA)... cable TV
Charter Communications (CHTR)... cable TV
