With crude above $100, and an overbought commodity situation across the agriculture and energy ETF space, a pullback is all but imminent in the short term. When this pullback occurs, there could be a nice opportunity to get into PowerShares DB Energy Fund (NYSEARCA:DBE), as the nondiversified energy ETF could benefit from the weather pattern in the front end of March.
Yes. we are approaching the end of northern hemisphere winter with a favorable supply situation, and yes, daytime temperatures in New York and Boston are likely to get into the low 50s (again) next week, but a stretch of cool air looks to be moving into the US that will keep demand relatively strong from Chicago eastward by the end of next week, leading to daily low temperatures up to 20° F below normal; more importantly, these temperatures can be between 20° and 30°F below the temperatures for the same time last year.
The table below from the Weather Trends International weekly energy newsletter shows the March HDD forecast as compared to last year, and a cool bias is evident. Fundamentally, I share the same opinion as many Seeking Alpha authors, as DBE and others may be overvalued at current levels, but given recent volatility in the energy complex, a well timed entry could be a nice opportunity for a short term weather driven play.
click to enlarge