Natural gas traders were nervous going into the winter of 2022.
The northern hemisphere was solidly in a La Niña year, a climate event that typically brings colder-than-average temperatures to North America and Europe. And the powerful winter storm Uri had just ravaged Texas the previous year.
And then Russia invaded Ukraine in February, cutting off vital supplies of gas into the European Union.
Disaster was on every natural gas investor’s mind.
Henry Hub, a U.S. natural gas index, unsurprisingly jumped more than 100% to $8.81 on fears of a wider shortage.
Yet, the feared winter disaster of 2022 never came.
America saw an unusually mild winter, with East Coast cities like New York seeing record-low snowfalls. Europe saw its second-warmest winter, with Poland notching 19°C (66.2°F) in January 2023. In fact, the Western Alps saw so little snowfall (its least since 1989) that some climatologists predicted the end of skiing in the region by the end of the century.
That sent the prices of natural gas plummeting, dragging share prices of energy companies down with them.
We saw another mild winter in 2023. Heating demand in countries like Germany was 25% lower than normal, and an unusually windy season meant wind turbine production further cut into gas demand. Europe exited the season with a record 62% volume of gas in storage, well above its average of 41%.
Understandably, renewed calls for a colder-than-average winter thisyear feel like the “Climatologist Who Cried Wolf.”
So, in this edition, I’m going to consider two questions (and one “sub” question) all this brings up.
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The National Weather Service projects a 59% chance we enter a La Niña year this month, which typically brings colder-than-normal temperatures to the Pacific Northwest and Western Europe. And we’re already seeing a severe polar vortex move across America and Europe from a disrupted jet stream. Predicting a cold winter is far easier when you’re already in the middle of one.
That’s quietly created a new sense of fear in natural gas markets. Henry Hub prices have ticked up 20% since mid-December to $3.50, while Dutch TTF Futures (which tracks the European market) has risen 22%.
The risk of a European natural gas shortage is also elevated.
According to Bloomberg, cold temperatures have already been depleting European natural gas storage sites at their fastest rate since 2018. Stocks are only 70% full, compared to 86% at the same point last year. Ukraine’s shutdown last week of the last major natural gas pipeline between Russia and Europe increases the risk of shortages.
That makes us bullish on natural gas prices. The fuel accounts for a fifth of total European energy consumption and almost 40% of all household heating.
It’s also a positive sign for natural gas prices and the companies that trade it – and especially for one particular stock that Eric recommends to his paid-up Fry’s Investment Report members.
This energy giant is part of the portfolio for its…
Monopolistic position,
Focus on low-cost assets,
And expansion into green energy production.
Panic buying in European natural gas will send this stock surging. The company supplies 30% of Europe’s natural gas, and shares rose as much as 100% above historical norms when Russia first invaded Ukraine in 2022. Even a milder increase in natural gas demand should push prices up 10% or more.
So, Eric is recommending staying invested in this blue-chip producer (and buying it below a certain price).
And tomorrow, Eric is releasing a series of special reports for those paid-up Fry’s Investment Report members. In these reports, he will break down exactly what humanity’s next biggest AI breakthrough – artificial general intelligence, or AGI, – means for investors… and how to prepare for its quick arrival.
Eric will share more about this exciting opportunity in tomorrow’s Smart Money. So, be sure to keep an eye out on your inbox.
