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Dec
7
John Murphy
Load Up on Fossil Fuel ETFs for the Long Term
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The short term pains for oil, natural gas, and coal highlight the long term appeal of the exchange traded funds for oil United States Oil (NYSE: USO), natural gas (NYSE: UNG), and coal Market Vectors Coal (NYSE: KOL).

There are many reasons for the short term decline as there are factors that make the long term outlook promising.

Oil, coal, and natural gas are now caught up in a variety of speculative and investor reasons that combine for almost a “perfect storm” that is dragging down the price of each.  United States Oil is down nearly 30 percent for 2014 (chart  below).  For that same period, Market Vectors Coal has fallen by more than 18 percent.Since the first of the year, United States Natural Gas has dropped by just over 6.5 percent.

Speculators are now turning to the United States Dollar (NYSE: UUP) due to the ending of quantitative easing by the Federal Reserve.

That should result in interest rates rising.  From that, assets in United States have risen in value.  Higher interest rates make Greenback securities more attractive to investors.

For investors, economic growth is still weak which has demand for oil, natural, gas and coal down.

This is expected to continue.  That will suppress the price of fossil fuels needed for economic growth.  This is especially so in China and India, the world’s two most populous countries. Demand will stay weak as these economies continue to regain footing after The Great Recession.  This is true for other emerging market nations, too.

Eventually factors will favor fossil fuels again.

When that happens, the prices for the exchange traded funds will rebound.  Until then, long term investors should use the decline to buy exchange traded funds at a discount.  Patience and savvy buying should result in profits for long term investors in United States Oil (NYSE: USO), natural gas (NYSE: UNG), and coal Market Vectors Coal (NYSE: KOL).

 

 

 

 



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