October 10, 2016, 3:15pm EST

I talked last week about the move in oil, and the lag in natural gas.

But natural gas was knocking on the door of a technical breakout.  As you can see, that breakout looks to be underway now.

Nat gas is now at $3.25.  If history is any indication, it could be in the low $4s soon.

That’s helped by chatter today from OPEC members out vocally supporting the production cut that was agreed to two weeks ago.  And the Secretary General of OPEC piled on today by saying the sharp contraction in investments (due to low prices) poses a threat to global oil supply.  As we’ve discussed, for those that had the “oil price to zero” arguments earlier in the year, supply changes, so does demand.

With all of this, oil continues to climb higher, testing the June highs today.  Here’s another look at the chart.

A break above the June highs of $51.67 would project a move to near $65 (technically speaking, it’s a C-wave).  Another big technical level above is $68.60, which is the 61.8% retracement of the move down from almost $95 in late 2014, to the lows of earlier this year.  That’s the breakdown in oil prices driven by OPEC’s 2014 refusal to cut production.  And now were on the verge of getting the first cut in eight years.  So oil is looking like higher levels are coming — it was up another 3% today.

What’s does it mean for stocks?  As we’ve discussed, for much of the year, lower oil has meant lower stocks, and higher oil has meant higher stocks.

This emerging bullish technical and fundamental backdrop for energy should be very good for stocks.  Remember, higher energy prices, in this environment, removes the risk of another oil price shock-to-sentiment (good for stocks, good for the economy). And it means producers can start producing again, downstream businesses can fill capacity, and we can start seeing some of the hundreds of thousands of U.S. jobs replenished that have been lost over the past two years.

Since OPEC rigged lower oil prices back in late 2014, we’ve had over 100 North American energy company bankruptcies.  Some of those have/are reorganizing and emerging with lean balance sheets into what could be a hot recovery in energy prices.  I’ll talk about some tomorrow.

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