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From this month’s issue:
TerraJoule.us remains firm with its call that global oil prices will reprice to $150/barrel by the year 2020. In the chart below, which equalizes various energy sources using the unit of a million btu, that translates to $25.86—per million btu. Notice, also, that the forecast does not make radical pricing changes for the other energy course outside of oil. CApp Coal (Central Appalachian coal) and PRB Coal (Powder River Basin coal) are only about 25% higher than today’s prices—which are currently at extreme lows. The most important pricing relationship, however, can be found between the price of N.A. NG (North American natural gas) and Asian LNG. Sourced at $6.00 per million btu and sold into the robustly growing Asian LNG market at $14.00, this arbitrage marks a substantial improvement in the price paid to producers in North America, and better still, the price paid by buyers in Asia. Indeed, the era of ridiculously high wintertime LNG prices in Asia near $20.00/million btu are coming to an end. Australia and the US together are in the process of dismantling the Middle East’s price gouging of Asian buyers. And although profit margins for Australian LNG will be lower, that country does have the advantage of its closer proximity to the whole of Southeast Asia. Overall, the prospect of substantial new LNG supply to Asia is bullish, economically, for that region. This adds another piece to the view of a global economy very much recovered by 2020.
Also in this month’s issue:
The model portfolio as of 30 September 2014 is up +1.62% since inception. The portfolio declined along with the broader market, during the month of September. There are no changes this month to the portfolio’s composition.