Natural Gas and Tourmaline Oil - October 30, 2023

Our Chart of the Day is intended to be a standalone technical chart. We use them to highlight open positions, stocks on our watch list, or indicators that we believe are important, or just interesting at the time. It is not a directional market call. Feel free to share them with others who may be interested.

(TOU, TSE)

Open Position: 4%

ACB: $69.46

[Note: The current ACB on the open position shows $69.46 but we have been on this trend for most of the ride since $61.74. Arrows in chart.]

HIGHER U.S. NATURAL GAS PRICES COMING SAY G&R:

• Natural resource investors Leigh Goehring and Adam Rozencwajg think that U.S. natural gas prices are “reaching a turning point” and could head much higher. U.S. natural gas production has peaked in all shale oil regions except the giant Permian Basin – the same trend as U.S. shale oil.

• Goehring and Rozencwajg project that there will only be a single international natural gas price once global demand exceeds U.S. supply.

• Why It Matters: U.S. natural gas is the cheapest unit of clean energy globally, allowing North Americans to heat their homes and businesses cleanly and affordably. In 2022, Europe’s average price for natural gas was over six times higher than the price paid by Americans. If Goehring and Rozencwajg are correct, North Americans will no longer enjoy this energy discount, which means higher home heating prices for already struggling Canadians and Americans.

• The strong run in uranium, which seems likely to have more to go, will only push utilities to adopt more natural gas. Nat gas is the KING hydrocarbon: cheap, clean and plentiful.

• Looking at the best ways to invest in NatGas, we see the United States Natural Gas Fund, which stated goal is to track the price of NatGas. Unfortunately, due to the construction of the fund, using a rolling futures contract construct, it doesn’t actually track the price of Natural Gas very well.

• So, when looking at the market, we can see in the chart below that our position in Tourmaline Oil (80% NatGas) tracks and outperforms the price of NatGas rather well.

I continue to believe that, a 2020 lockdown economy aside, US NatGas is likely to converge with the much higher European price over the next year or so. My view is that NatGas is not a bridge fuel to the future, but along with nuclear power, NatGas is the future.