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What Explains the Upward Move in Weekly Natural Gas Prices?
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The U.S. Energy Department's weekly inventory release showed a lower-than-expected increase in natural gas supplies. The encouraging inventory numbers, coupled with favorable weather predictions, meant that the U.S. benchmark gained 3.5% in the holiday-shortened last week.
Let us see how the natural gas situation looks like after the U.S. Energy Department's latest weekly inventory release:
EIA Reports a Build Below Market Expectations
Stockpiles held in underground storage in the lower 48 states rose by 14 billion cubic feet (Bcf) for the week ended Mar 26 compared to the guidance of a 19 Bcf addition. The increase compared with the five-year (2016-2021) average net shrinkage of 24 Bcf and last year’s drop of 20 Bcf for the reported week.
The first build of the year puts total natural gas stocks at 1,764 billion cubic feet (Bcf), which is 225 Bcf (11.3%) below the 2020 levels at this time and 36 Bcf (2%) lower than the five-year average.
Total supply of natural gas averaged 95.4 Bcf per day, essentially unchanged on a weekly basis as higher dry production was offset by lower shipments from Canada.
Meanwhile, daily consumption fell 4.4% to 92.5 Bcf from 96.8 Bcf in the previous week, dragged down by lower residential/commercial gas usage due to above-average temperatures that stymied heating usage.
Natural Gas Prices Post a Gain
Natural gas prices rose last week following the lower-than-expected inventory build. Futures for May delivery ended Thursday at $2.64 per million British thermal units (MMBtu) on the New York Mercantile Exchange, up 3.5% from the previous week’s closing. The increase in the price of natural gas is also the result of forecast models, indicating a cold front across the Midwest and Northeast in the days ahead, which would translate into bigger draws due to more use of heaters.
Wrap-Up
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. With the latest models showing bullish changes toward a rather strong late season cold blast, prices have edged up a bit.
However, with winter drawing to a close and the so-called ‘shoulder season’ of typically low natural gas demand in the spring about to settle in, prices could be in for more downside risks than upside potential. While growing LNG export and stable industrial demand are providing some support for a price gain, it will be weather conditions across the United States that will dictate the energy commodity’s future.
The lingering uncertainty over the fuel means that most natural gas-focused companies carry a Zacks Rank #3 (Hold). As a result, investors should preferably wait for a better entry point before buying shares in EQT Corporation (EQT - Free Report) , Range Resources (RRC - Free Report) , Comstock Resources (CRK - Free Report) , SilverBow Resources (SBOW - Free Report) , Southwestern Energy Company (SWN - Free Report) etc. Others like Cabot Oil & Gas Corporation are further down the pecking order, with a Zacks Rank #4 (Sell).
If you are still looking for near-term natural gas plays, Antero Resources (AR - Free Report) might be a good selection.
Antero Resources is the third-largest U.S. gas producer and a leading operator in the Appalachian basin — the most-prolific domestic gas basin — with around 515,000 net acres. More than 65% of the company’s total output is natural gas. While the company’s low-cost, high-quality inventory should ensure long-term output growth, cash flows will also receive some downside protection from attractive hedges.
The 2021 Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company indicates 244.64% earnings per share growth over 2020.
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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What Explains the Upward Move in Weekly Natural Gas Prices?
The U.S. Energy Department's weekly inventory release showed a lower-than-expected increase in natural gas supplies. The encouraging inventory numbers, coupled with favorable weather predictions, meant that the U.S. benchmark gained 3.5% in the holiday-shortened last week.
Let us see how the natural gas situation looks like after the U.S. Energy Department's latest weekly inventory release:
EIA Reports a Build Below Market Expectations
Stockpiles held in underground storage in the lower 48 states rose by 14 billion cubic feet (Bcf) for the week ended Mar 26 compared to the guidance of a 19 Bcf addition. The increase compared with the five-year (2016-2021) average net shrinkage of 24 Bcf and last year’s drop of 20 Bcf for the reported week.
The first build of the year puts total natural gas stocks at 1,764 billion cubic feet (Bcf), which is 225 Bcf (11.3%) below the 2020 levels at this time and 36 Bcf (2%) lower than the five-year average.
Total supply of natural gas averaged 95.4 Bcf per day, essentially unchanged on a weekly basis as higher dry production was offset by lower shipments from Canada.
Meanwhile, daily consumption fell 4.4% to 92.5 Bcf from 96.8 Bcf in the previous week, dragged down by lower residential/commercial gas usage due to above-average temperatures that stymied heating usage.
Natural Gas Prices Post a Gain
Natural gas prices rose last week following the lower-than-expected inventory build. Futures for May delivery ended Thursday at $2.64 per million British thermal units (MMBtu) on the New York Mercantile Exchange, up 3.5% from the previous week’s closing. The increase in the price of natural gas is also the result of forecast models, indicating a cold front across the Midwest and Northeast in the days ahead, which would translate into bigger draws due to more use of heaters.
Wrap-Up
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. With the latest models showing bullish changes toward a rather strong late season cold blast, prices have edged up a bit.
However, with winter drawing to a close and the so-called ‘shoulder season’ of typically low natural gas demand in the spring about to settle in, prices could be in for more downside risks than upside potential. While growing LNG export and stable industrial demand are providing some support for a price gain, it will be weather conditions across the United States that will dictate the energy commodity’s future.
The lingering uncertainty over the fuel means that most natural gas-focused companies carry a Zacks Rank #3 (Hold). As a result, investors should preferably wait for a better entry point before buying shares in EQT Corporation (EQT - Free Report) , Range Resources (RRC - Free Report) , Comstock Resources (CRK - Free Report) , SilverBow Resources (SBOW - Free Report) , Southwestern Energy Company (SWN - Free Report) etc. Others like Cabot Oil & Gas Corporation are further down the pecking order, with a Zacks Rank #4 (Sell).
If you are still looking for near-term natural gas plays, Antero Resources (AR - Free Report) might be a good selection.
Antero Resources is the third-largest U.S. gas producer and a leading operator in the Appalachian basin — the most-prolific domestic gas basin — with around 515,000 net acres. More than 65% of the company’s total output is natural gas. While the company’s low-cost, high-quality inventory should ensure long-term output growth, cash flows will also receive some downside protection from attractive hedges.
The 2021 Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company indicates 244.64% earnings per share growth over 2020.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>