Memorial Day is just weeks away, and the unofficial start of summer means higher prices not just for consumers at the pump but investors as well. As crude oil continues its march upward, prices could top $120 or $125 a barrel, according to Breakout guest Jim Cordier, president and founder of the Tampa, Florida-based Liberty Trading Group. Cordier, who's been trading commodities for 24 years, told Breakout Host Jeff Macke that oil and gasoline prices skyrocket every year just before the U.S. summer driving season begins.
Once school resumes and the leaves begin to change color, oil prices could lose steam and slide backward, meaning a likely return to $100 a barrel, says Cordier. Even if that proves true, crude has made a remarkable recovery since the downturn. It's trading 30 percent higher now than it was last April. Cordier says he'll remain bullish on crude through spring and summer by shorting put options —- essentially a bet against a sharp drop in black gold anytime soon. For investors squeamish about buying and trading crude oil futures contracts, there are other avenues to make money: buying put options or investing in the United States Oil Fund (Ticker: USO). Macke has a long position in USO.
Can money be made in natural gas, the so-called near-term solution for a clean energy future? Highly doubtful, says Cordier. A few years ago natural gas was breaking new ground, trading near $7 and $8 British Thermal Units, but money quickly left the commodity once the Commodities Futures Trading Commission decided to curb the number of new ETFs entering the natural gas market.
Expect natural gas prices to remain stagnant in the near future, says Cordier, with the upside at $5 Btu at most. Natural gas may dominate the heating market in the Northeast U.S., but "you're not going to have people pulling up to a national gas station and filling up their car," says Cordier.
The U.S. has an abundance of natural gas, and producers can fulfill U.S. needs for the next 10 years, says Cordier. Natural gas futures for May delivery touched new highs this week, trading 8 percent higher than a year ago.
We want to know what you think. Write to us at Breakoutcrew@yahoo.com.
- put options
- crude oil futures contracts
- crude oil
- gasoline prices