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Here's How Last Week Turned Out for the Natural Gas Market
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The U.S. Energy Department's weekly inventory release showed a lower-than-expected decrease in natural gas supplies. This bearish withdrawal, coupled with unfavorable weather predictions, meant that the U.S. benchmark lost 2.5% 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 Withdrawal Below Market Expectations
Stockpiles held in underground storage in the lower 48 states fell by 11 billion cubic feet (Bcf) for the week ended Mar 12 compared to the guidance of a 17 Bcf decline. The decrease was also below the five-year (2016-2021) average net shrinkage of 59 Bcf and last year’s drop of 15 Bcf for the reported week.
The latest official data puts total natural gas stocks at 1,782 billion cubic feet (Bcf), which is 253 Bcf (12.4%) below the 2020 levels at this time and 93 Bcf (5%) lower than the five-year average.
Total supply of natural gas averaged 95.4 Bcf per day, down 0.3% on a weekly basis due to a slight decrease in dry production and shipments from Canada.
Meanwhile, daily consumption fell 2.7% to 100.2 Bcf from 103 Bcf in the previous week, dragged down by lower residential/commercial gas usage and a decline in industrial demand, partly offset by higher liquefied natural gas (LNG) exports.
Natural Gas Registers a Weekly Decline
Natural gas prices fell last week following the lower-than-expected inventory draw. Futures for April delivery ended Friday at $2.54 per million British thermal units (MMBtu) on the New York Mercantile Exchange, down 2.5% from the same time, previous week. The decrease in the price of natural gas is also the result of forecast models, indicating mild-to-warm weather throughout most of the United States in the days ahead, which translates into smaller draws due to less 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 bearish changes toward the onset of mild spring weather, prices are expected to trend lower. In fact, downside risks would continue to outweigh the upside potential unless the weather pattern flips significantly to cause an increase in natural gas usage. While growing LNG export and stable power 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.
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Here's How Last Week Turned Out for the Natural Gas Market
The U.S. Energy Department's weekly inventory release showed a lower-than-expected decrease in natural gas supplies. This bearish withdrawal, coupled with unfavorable weather predictions, meant that the U.S. benchmark lost 2.5% 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 Withdrawal Below Market Expectations
Stockpiles held in underground storage in the lower 48 states fell by 11 billion cubic feet (Bcf) for the week ended Mar 12 compared to the guidance of a 17 Bcf decline. The decrease was also below the five-year (2016-2021) average net shrinkage of 59 Bcf and last year’s drop of 15 Bcf for the reported week.
The latest official data puts total natural gas stocks at 1,782 billion cubic feet (Bcf), which is 253 Bcf (12.4%) below the 2020 levels at this time and 93 Bcf (5%) lower than the five-year average.
Total supply of natural gas averaged 95.4 Bcf per day, down 0.3% on a weekly basis due to a slight decrease in dry production and shipments from Canada.
Meanwhile, daily consumption fell 2.7% to 100.2 Bcf from 103 Bcf in the previous week, dragged down by lower residential/commercial gas usage and a decline in industrial demand, partly offset by higher liquefied natural gas (LNG) exports.
Natural Gas Registers a Weekly Decline
Natural gas prices fell last week following the lower-than-expected inventory draw. Futures for April delivery ended Friday at $2.54 per million British thermal units (MMBtu) on the New York Mercantile Exchange, down 2.5% from the same time, previous week. The decrease in the price of natural gas is also the result of forecast models, indicating mild-to-warm weather throughout most of the United States in the days ahead, which translates into smaller draws due to less 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 bearish changes toward the onset of mild spring weather, prices are expected to trend lower. In fact, downside risks would continue to outweigh the upside potential unless the weather pattern flips significantly to cause an increase in natural gas usage. While growing LNG export and stable power 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.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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