By Sasha Cekerevac
Make no mistake; that is a market collapse in natural gas prices. The current price for natural gas is $2.72 per a million British thermal units (Btu). To give you a solid idea of where we've been in 2011, at the beginning of June, we saw prices approximate $5.00 per a million Btu. In almost seven months, propane prices have fallen in order to 46%. This is that of a market collapse looks akin to.
First, let's take a quick look at why prices have fallen and then we'll investigate what it means for your portfolio. We're in the middle of January and winter has barely touched the Oughout.S. Of course, we will get some colder weather and snow, but the mild weather has hurt natural gas sales. This means that the inventory of gas in storage is being filled to the brim, and there's only bunches of room to store the stuff. A market collapse occurs when there aren' buyers and there most likely sellers. If your facilities are full, you do not have room to buy any natural gas no matter how cheap it could. Not being able to work off inventory a new consequence of mild weather means you're sitting with a full tank of gas.
The new shale developments are also hurting the market, because we've now added a lot newest supply of natural passing of gas. The U.S. is now the world's biggest producer of natural gas and a lot of investors rushed into stocks hoping this new supply would push up corporate earnings. That would be true if there the market to buy up all of this new supply, but there's a significant amount of gas floating around.
This is now being seen in the corporate earnings and pre-announcements by companies in this community. It looks like we're going to see bad corporate earnings for producers of natural gas. Firms like Cabot Oil & Gas Corporation (NYSE/COG, $66.47), Range Resources Corporation (NYSE/RRC, $54.30),Southwestern Energy Company (NYSE/SWN, $29.28), and QEP Resources, Inc. (NYSE/QEP, $27.50) all have been hit hard and have more in order to. Over the next few quarters, we're going to see corporate earnings putting up with the natural gas market collapse and that isn't about to change anytime soon.
Is there any excellent news because of this market collapse? Possibly; as devote tons of less money on heating their homes, they could take those savings and your time money in other areas, such as on a getaway. Firms like Carnival Corporation (NYSE/CCL, $34.10) have been moving up in price lately, as some buyers are thinking the same.
Will it help their corporate earnings? It's also soon to say. In fact, considering where the economy is, I wouldn't rush into any long-term buys of consumer discretionary stocks until we be aware of the economy start moving this.
One company that does well and might have better corporate earnings is Wal-Mart Stores, Inc. (NYSE/WMT, $59.21), as lower-income those people who are saving money because of your natural gas market collapse might spend more in the Wal-Mart store. With the price near a 52 week high, I would wait for pullback. With a dividend yield of 2.47%, it should look interesting; but never rush into any cost. Patience is a virtue when it comes to earning long-term wealth.