|
|
|
|
||
Natural Gas Soars. Natural Gas Stocks Climb, Too.Natural Gas Soars. Natural Gas Stocks Climb, Too.Salzman, Avi. Barron's (Online); New York Natural gas hit a new three-year high on Friday, surging to $4.34 per million British thermal units, up 3.7% on the day after rising 7.4% on Thursday. It was the highest price for the commodity since December 2018, when it traded above $4.40. And on Friday natural gas stocks started to respond, rising sharply higher. EQT (EQT) was up 7.3%, Southwestern Energy (SWN) gained 8.3%, Chesapeake Energy (CHK) rose 4.4%, and Cabot OIl & Gas (COG) climbed 5.7%. Chesapeake also got a new Buy recommendation from BMO analyst Philip Jungwirth, with a $70 price target, 26% higher than its current price. That's a change from the past few months. On several days when the commodity has risen, stocks have lagged . One reason may be that some producers like EQT, Southwestern, and Range Resources (RRC) have hedged some of their 2022 production at below-market prices, limiting their potential upside, noted Citi analyst Kevin Cunane. Thursday's price increase appears to have been tied in part to market dynamics. Short-sellers had bet against natural gas because of concerns that Hurricane Ida, which struck Cuba on Friday and is expected to hit Louisiana on Saturday, would hit gas export facilities near the Gulf of Mexico. When the hurricane turned, they had to quickly cover their bets, according to Andrew Weissman of EBW Analytics Group. In addition, the latest report from the U.S. Energy Information Administration showed that gas inventories grew by a much smaller amount than expected, a good sign for the supply-and-demand picture. In fact, the winter is shaping up to be a profitable one for producers. The EIA forecast earlier this month that the U.S. would start winter with about 4% less gas in storage than the average of the past five years, meaning consumers are likely to have to pay more to heat their homes. The problem for natural gas stocks in recent years is that there was simply too much gas being produced, particularly in U.S. shale fields. Much of that gas is a byproduct of oil production. But oil producers have cut back on their number of wells to conserve cash, so the glut of gas has started to dissipate. And an increasing amount of gas is being shipped overseas in liquefied form. Friday's stock price surge could be a sign that investors are starting to believe in the bullish thesis on natural gas and overlook those hedges. If production stays relatively low and demand keeps rising, gas prices could stay at levels that would make the companies considerably more profitable. It's a bet that more investors appear willing to make. |
return to message board, top of board |