The Foolish Commodities Recap

As temperatures heat up across much of the country, M&A activity and earnings season are bringing some sizzle to the commodity sectors as well. Investors, meanwhile, are feeling a different kind of heat, as they try to make sense of declines in oil and natural-gas prices, continued weakness in many mining stocks, and a sudden onset of headlines heralding the end of commodity demand growth.

Oil and natural gas deliver a gut check
As we saw with gold and silver back in March and coal earlier this month, corrections within long-term commodity bull markets can occur suddenly and without warning. After climbing beyond $145 a barrel, oil slipped down to the $130 mark last week, where it continues to hover. More surprising to this Fool was that natural gas retreated twice as far on a percentage basis, down 22%, from around $13.50 to $10.50. Sure, U.S. inventories rose more than expected, but I believe the drop smacked of an overreaction. A look at my colleague David Lee Smith's discussion of several energy myths might help restore some confidence.

Meanwhile, Royal Dutch Shell (NYSE: RDS-A  ) (NYSE: RDS-B  ) announced a $5.8 billion deal last week to acquire Canadian natural-gas play Duvernay Oil. Shell also ditched plans to build a refinery in Canada. Pipeline operator Kinder Morgan Energy Partners (NYSE: KMP  ) delivered robust earnings, in part because of stellar volumes out of the prolific Barnett Shale. Meanwhile, following terrific second-quarter results from Korean steelmaker POSCO (NYSE: PKX  ) , Russian competitor Mechel (NYSE: MTL  ) revealed first-quarter results that were simply stunning.

Despite a nice pop today and continued interest by major miners to secure coal assets, coal stocks have languished over the past couple of weeks. Cleveland-Cliffs (NYSE: CLF  ) , for example, announced that it will acquire coal giant Alpha Natural Resources (NYSE: ANR  ) in a $10 billion deal to create a new entity called Cliffs Natural Resources.

There are 21 companies rated in the Motley Fool CAPS database under the "Coal" tag. Learn more about the industry and the thoughts of more than 110,000 investors like you by checking out CAPS today.

Last call for key news:

Fool contributor Christopher Barker captains yachts and writes about stocks. You can find him acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Cleveland-Cliffs. POSCO is an Income Investor recommendation. The Motley Fool has a disclosure policy.


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