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Know Why Natural Gas Prices Ended 4.1% Higher Past Week
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The U.S. Energy Department's weekly inventory release showed a higher-than-expected increase in natural gas supplies. The negative inventory numbers notwithstanding, futures settled with a handy gain week over week, buoyed by a hint of tightening supply and predictions of strong cooling demand.
Despite all this, the market hasn't been kind to natural gas in 2023, with the commodity trading considerably lower year to date and briefly breaking below the $2 threshold for the first time since 2020. At this time, we advise investors to focus on stocks like Chesapeake Energy (CHK - Free Report) and Cheniere Energy (LNG - Free Report) .
EIA Reports a Build Larger Than Anticipated
Stockpiles held in underground storage in the lower 48 states rose 32 billion cubic feet (Bcf) for the week ended Aug 25, above the guidance of a 30 Bcf addition per a survey conducted by S&P Global Commodity Insights. The build compared with the five-year (2018-2022) average net injection of 51 Bcf and last year’s growth of 61 Bcf for the reported week.
The latest increase puts total natural gas stocks at 3,115 Bcf, which is 484 Bcf (18.4%) above the 2022 level at this time and 249 Bcf (8.7%) higher than the five-year average.
The total supply of natural gas averaged 108.8 Bcf per day, up 0.3 Bcf per day on a weekly basis due to an increase in dry production.
Meanwhile, daily consumption edged up 0.2% to 99.9 Bcf from 99.7 Bcf the previous week, mainly reflecting a pickup in deliveries to LNG export terminals, partly offset by slightly lower residential/commercial demand.
Natural Gas Prices Still Post A Gain
Natural gas prices trended upward last week despite the higher-than-expected inventory build. Futures for October delivery ended Friday at $2.77 on the New York Mercantile Exchange, rising 4.1% from the previous week’s closing. The increase in natural gas realization is the result of favorable weather predictions and lower production.
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. With forecasts for hotter weather in the days ahead, usage of the commodity to generate electricity to meet cooling demand is expected to be strong.
Apart from bullish weather conditions, natural gas has been pushed higher by a projected brake in upstream activity. According to energy services provider Baker Hughes, U.S. natural gas rig count — a pointer to where production is headed — is now at its lowest since January 2022. Industry observers believe this could set the stage for a pullback in near-term drilling and supplies during the peak summer cooling demand.
These factors were partly offset by maintenance-related outages affecting LNG inflows to export plants and a possibility that major player Australia could avert a labor strike that threatened to cut the country’s supplies to the world.
Despite these temporary disruptions, a stable demand catalyst in the form of continued strong LNG feedgas deliveries is supporting natural gas. While falling from their April highs, LNG shipments for export from the United States have been elevated for months on the back of environmental reasons and Europe’s endeavor to move away from its dependence on Russian natural gas supplies following the war in Ukraine.
Final Thoughts
Despite last week’s increase, the natural gas market is down 62% so far this year. Based on several factors, the space is currently quite unpredictable and spooked by the sudden changes in weather and production patterns. As such, investors are clueless about what to do. As of now, the lingering uncertainty over the fuel means that they should preferably opt for holding on to fundamentally strong stocks like Chesapeake Energy and Cheniere Energy.
Chesapeake Energy: Chesapeake has a premier portfolio with more than 15 years of inventory spread over some 2,200 locations, and around 90% of its total output comprises natural gas. The Zacks Rank #3 (Hold) company’s exposure to premium markets and focus on costs and margins should help it to benefit from any increase in natural gas prices.
Chesapeake beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 23.7%. Valued at around $12 billion, CHK has lost 9.5% in a year.
Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage.
Cheniere Energy has a projected earnings growth rate of 487.1% for the current year. The Zacks Consensus Estimate for this #3 Ranked natural gas exporter’s 2023 earnings has been revised 7.2% upward over the past 30 days. LNG shares have gained 3.1% in a year.
At the same time, investors might want to sell some bottom-ranked stocks like Gulfport Energy Corporation (GPOR - Free Report) .
Gulfport Energy: GPOR has operations across more than 250,000 net acres in the Appalachia and Anadarko basins, and more than 90% of its total output comprises natural gas.
Gulfport Energy has a projected earnings growth rate of (24.9%) for the current year. Valued at $2.3 billion, this Zacks Rank #5 (Strong Sell) company’s 2023 earnings have been revised 6.3% downward over the past 60 days. GPOR shares have gained 24.4% in a year.
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Know Why Natural Gas Prices Ended 4.1% Higher Past Week
The U.S. Energy Department's weekly inventory release showed a higher-than-expected increase in natural gas supplies. The negative inventory numbers notwithstanding, futures settled with a handy gain week over week, buoyed by a hint of tightening supply and predictions of strong cooling demand.
Despite all this, the market hasn't been kind to natural gas in 2023, with the commodity trading considerably lower year to date and briefly breaking below the $2 threshold for the first time since 2020. At this time, we advise investors to focus on stocks like Chesapeake Energy (CHK - Free Report) and Cheniere Energy (LNG - Free Report) .
EIA Reports a Build Larger Than Anticipated
Stockpiles held in underground storage in the lower 48 states rose 32 billion cubic feet (Bcf) for the week ended Aug 25, above the guidance of a 30 Bcf addition per a survey conducted by S&P Global Commodity Insights. The build compared with the five-year (2018-2022) average net injection of 51 Bcf and last year’s growth of 61 Bcf for the reported week.
The latest increase puts total natural gas stocks at 3,115 Bcf, which is 484 Bcf (18.4%) above the 2022 level at this time and 249 Bcf (8.7%) higher than the five-year average.
The total supply of natural gas averaged 108.8 Bcf per day, up 0.3 Bcf per day on a weekly basis due to an increase in dry production.
Meanwhile, daily consumption edged up 0.2% to 99.9 Bcf from 99.7 Bcf the previous week, mainly reflecting a pickup in deliveries to LNG export terminals, partly offset by slightly lower residential/commercial demand.
Natural Gas Prices Still Post A Gain
Natural gas prices trended upward last week despite the higher-than-expected inventory build. Futures for October delivery ended Friday at $2.77 on the New York Mercantile Exchange, rising 4.1% from the previous week’s closing. The increase in natural gas realization is the result of favorable weather predictions and lower production.
As is the norm with natural gas, changes in temperature and weather forecasts can lead to price swings. With forecasts for hotter weather in the days ahead, usage of the commodity to generate electricity to meet cooling demand is expected to be strong.
Apart from bullish weather conditions, natural gas has been pushed higher by a projected brake in upstream activity. According to energy services provider Baker Hughes, U.S. natural gas rig count — a pointer to where production is headed — is now at its lowest since January 2022. Industry observers believe this could set the stage for a pullback in near-term drilling and supplies during the peak summer cooling demand.
These factors were partly offset by maintenance-related outages affecting LNG inflows to export plants and a possibility that major player Australia could avert a labor strike that threatened to cut the country’s supplies to the world.
Despite these temporary disruptions, a stable demand catalyst in the form of continued strong LNG feedgas deliveries is supporting natural gas. While falling from their April highs, LNG shipments for export from the United States have been elevated for months on the back of environmental reasons and Europe’s endeavor to move away from its dependence on Russian natural gas supplies following the war in Ukraine.
Final Thoughts
Despite last week’s increase, the natural gas market is down 62% so far this year. Based on several factors, the space is currently quite unpredictable and spooked by the sudden changes in weather and production patterns. As such, investors are clueless about what to do. As of now, the lingering uncertainty over the fuel means that they should preferably opt for holding on to fundamentally strong stocks like Chesapeake Energy and Cheniere Energy.
Chesapeake Energy: Chesapeake has a premier portfolio with more than 15 years of inventory spread over some 2,200 locations, and around 90% of its total output comprises natural gas. The Zacks Rank #3 (Hold) company’s exposure to premium markets and focus on costs and margins should help it to benefit from any increase in natural gas prices.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Chesapeake beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 23.7%. Valued at around $12 billion, CHK has lost 9.5% in a year.
Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage.
Cheniere Energy has a projected earnings growth rate of 487.1% for the current year. The Zacks Consensus Estimate for this #3 Ranked natural gas exporter’s 2023 earnings has been revised 7.2% upward over the past 30 days. LNG shares have gained 3.1% in a year.
At the same time, investors might want to sell some bottom-ranked stocks like Gulfport Energy Corporation (GPOR - Free Report) .
Gulfport Energy: GPOR has operations across more than 250,000 net acres in the Appalachia and Anadarko basins, and more than 90% of its total output comprises natural gas.
Gulfport Energy has a projected earnings growth rate of (24.9%) for the current year. Valued at $2.3 billion, this Zacks Rank #5 (Strong Sell) company’s 2023 earnings have been revised 6.3% downward over the past 60 days. GPOR shares have gained 24.4% in a year.