Energy prices are down again today huge due to the above normal temperatures across the Eastern United States. Oil prices are down to $56+ per barrel, natural gas prices are below $6.50 per btu, and gasoline and heating oil are both trading lower as well.
My belief is that these price lows are temporary due to weather, a slowing economy, and a US dollar that is reflating in the short-term since the dollar has dropped significantly in December against most major currencies. A major energy trader on CNBC noted that oil supplies have been gradually decreasing in the US as the prices have been going lower. He noted that if demand should spike due to abnormally cold weather or due to a heat wave this summer, then prices could be much, much higher from where they are today.
The best market gains can always be made with contrarian bets. Today presents one of those contrarian opportunities if one is underexposed to energy and wishes to increase their commodity exposed and is not afraid of volatility over the next couple of years, particularly with many energy stocks trading at 2007 expected P/E ratios of below 10.
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