Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Natural Gas Companies: A Contrarian Bet on Higher Prices

Commodities / Natural Gas Apr 13, 2012 - 09:27 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDiane Alter writes: The decline in natural gas stocks has been anything but natural lately.

With ample stores and cheap prices, natural gas-related equities have taken a beating and continue to be battered.

While it is always difficult to call a bottom, the tide may be turning for natural gas companies despite the latest data.


The price of natural gas fell again last week after the government reported an unexpectedly large increase in supply. To date, natural gas prices have slumped to levels not seen in 10 years.

Recent Energy Information Administration (EIA) reports reveal that the energy industry continues to deliver gas at a faster rate than Americans can consume it.

U.S. supplies grew by 42 billion cubic feet in the week ended March 30, pushing the country's total supply to 2.5 trillion cubic feet. According to Platts, a premier source for energy prices, industry analysts had expected supplies to grow between 33 billion to 37 billion cubic feet.

With natural gas stores bursting at the seams, some of the nation's largest producers have announced plans to scale back production.

Jen Snyder, head of North American gas for research firm Wood Mackenzie told the Washington Post, "There hasn't been enough demand to use all the supply being pushed into the market."

Where prices go from here depends a great deal on the weather.

Commodity Prices Drive Natural Gas Companies
A mild spring is forecast for most of the country, and the pleasant weather is expected to push natural gas prices even lower. A hot summer would enhance demand for the fuel as people crank up their air conditioners, requiring natural gas-fueled power plants to burn more of it.

Just this week natural gas prices continued their slide, falling below $2 per cubic foot.

Prices have not been below $2 since January 2002. Meanwhile, oil prices have stayed high and are taking a hefty chunk out of consumers' wallets.

Even so, several industry analysts see huge potential in the natural gas sector.

According to Money Morning Global Energy Strategist Dr. Kent Moors, low natural gas prices offer great opportunity.

"First," Moors said, "the price of natural gas will rise again. It's inevitable. And there is plenty of fundamental evidence in other commodity markets as to why. It might not be tomorrow, but it's coming."

"Second, and more important, investors seem so overly focused on the near-term asset performance that they fail to recognize real long-term potential," said Moors.

That allows investors to get in on natural gas companies while they are still cheap.

Opportunity in Natural Gas Companies
Natural gas is used across all sectors. This versatile fossil fuel has myriad applications commercially, in homes, in industry and in the transportation sector.

According to the EIA, energy from natural gas accounts for 24% of total energy consumed in the United States, making it a vital component of the nation's energy supply.

Globally, natural gas consumption is also surging.

The latest data available from the Worldwatch Institute, a new Vital Signs Online report, shows that the fossil fuel has rebounded 7.4% from its 2009 slump, putting natural gas' share of worldwide total energy consumption at 23.8%.

While the largest increase in natural gas use since 2009 occurred in the U.S., the Asia Pacific region also experienced strong growth.

Demand also climbed in Russia, the world's second-largest natural gas consumer. Even the Middle East, home to some of the richest natural gas resources in the world, but lacking in the proper infrastructure to facilitate much domestic consumption, saw a rise in demand for natural gas.

Currently, Japan is increasing LNG (liquid natural gas) imports after the Fukushima nuclear disaster forced the shutdown of atomic power plants and increased its reliance on gas-fired generators.

Bloomberg reports that Japan's second biggest city distributor, Osaka Gas Co., is in talks to import LNG from a trio of U.S-based companies: Dominion Resources ( NYSE: D); Sempra Energy (NYSE:SRE) and Freeport LNG LLC.

According to the Bloomberg report, Osaka Gas plans to buy more stakes in LNG projects to increase the volume it owns by the end of fiscal 2020 from 100,000 to 1.5 million tons per year.

Osaka is also in talks with BG Group PLc (PINK: BRGYY) and Gas Natural SDG Sa (PINK: GASNY) to purchase a portion of the supplies they agreed to buy from Cheniere Energy Partners LP's (NYSE: CQP) planned LNG export terminal at Sabine Pass in Louisiana.

All of this activity bodes well for the industry.

According to Moors, "The rise in demand for everything from electricity to petrochemical feeder stock, liquefied natural gas (LNG) exports, and even usage in vehicle fuels, will start driving that price up over the next two years."

But Moors isn't the only analyst bullish on natural gas companies.

Michael Murphy, managing partner and CEO of Rosecliff Capital is particularly optimistic on the sector, and told CNBC that investors should prepare for a rebound.

"We have had a very warm winter that forced the shorts to jump on natural gas, but that is going to change because the weather will turn," Murphy said. "The price of natural gas may go a little bit lower before it goes higher, but if we get a real energy policy set up, we'll be able to send natural gas around the globe and these natural gas companies, and natural gas prices, will go a lot higher."

Currently considered to be a contrarian bet, it appears that now might be the right time to invest in natural gas companies.

Source :http://moneymorning.com/2012/04/13/natural-gas-companies-a-contrarian-bet-on-higher-prices/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in