Breaking News
0

Why Gas Prices Fell 4% And What Should Investors Do Now

By Zacks Investment ResearchStock MarketsSep 20, 2019 08:21AM ET
www.investing.com/analysis/why-gas-prices-fell-4-and-what-should-investors-do-now-200466520
Why Gas Prices Fell 4% And What Should Investors Do Now
By Zacks Investment Research   |  Sep 20, 2019 08:21AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The U.S. Energy Department's weekly inventory release showed a larger-than-expected increase in natural gas supplies. The bearish injection, which was also higher than the five-year average, sparked a sell-off yesterday that left the U.S. benchmark with its largest one-day percentage loss since mid-July.

A Larger-than-Expected Increase in Supplies

Stockpiles held in underground storage in the lower 48 states rose by 84 billion cubic feet (Bcf) for the week ended Sep 13, above the guidance (of 76 Bcf gain). The increase was slightly higher than the five-year (2014-2018) average net injection of 82 Bcf and was same as last year’s addition.

The latest rise in inventories puts total natural gas stocks at 3.103 trillion cubic feet (Tcf) - 393 Bcf (14.5%) above 2018 levels at this time but 75 Bcf (2.4%) under the five-year average.

Fundamentally speaking, total supply of natural gas averaged 96.2 Bcf per day, essentially unchanged on a weekly basis as dry production remained flat. Meanwhile, daily consumption was down 2.1% to 83.2 Bcf compared to 85 Bcf in the previous week primarily due to lower power sector demand driven by below average temperatures across most of U.S. This was partly offset by increased deliveries to LNG export terminals.

Prices End Sharply Lower

The natural gas futures market slumped following the bigger-than-expected climb in U.S. supplies, with the commodity posting a 3.8% loss yesterday and erasing some of the steep gains over the past two weeks associated with warmer weather and higher cooling demand. Futures for October delivery also fell after weather updates showed forecasts of mild temperatures in a number of regions of the Lower 48 U.S. states that would hamper the demand for natural gas this upcoming winter heating season.

Surging Production Limits Upside Potential

The demand for cleaner fuels and the commodity’s relatively lower price has catapulted natural gas' share of domestic electricity generation to 35%, from 25% in 2011. Moreover, new pipelines to Mexico, together with large-scale liquefied gas export facilities have meant that exports out of the U.S. are set for a quantum leap. Finally, higher consumption from industrial projects will likely ensure strong natural gas demand.

However, record high production in the United States and expectations for healthy growth through 2020 means that supply will keep pace with demand. Therefore, prices are likely to trade sideways but for weather-driven movements.

Avoiding Gas-Focused Equities is a Good Idea

Natural gas might experience short-lived surge based on positive weather forecasts but any powerful turnaround looks unlikely at the moment. With gas output in the lower 48 states recently hitting a record 92.1 Bcf per day, there is little room for prices to improve meaningfully from their current levels of around $2.5 per MMBtu.

The bearish natural gas fundamentals and its seasonal nature is responsible for the understandable reluctance on investors’ part to dip their feet into these stocks. In fact, the commodity fell to lows not seen since May 2016 last month.

Moreover, most natural gas-heavy upstream companies like EQT Corporation (NYSE:EQT) , SilverBow Resources, Inc. (NYSE:SBOW) , Cabot Oil & Gas Corporation (NYSE:COG) , Gulfport Energy Corporation (NASDAQ:GPOR) , Southwestern Energy Company (NYSE:SWN) etc. carry a Zacks Rank #3 (Hold), which means that investors should preferably wait for a better entry point.

If you are still looking for near-term natural gas play, Montage Resources Corporation (NYSE:MR) might be an excellent selection. The company has a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Over 30 days, the Irving, TX-based company has seen the Zacks Consensus Estimate for 2019 earnings per share increase 8% to $1.88.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>



Southwestern Energy Company (SWN): Free Stock Analysis Report

EQT Corporation (EQT): Free Stock Analysis Report

Eclipse Resources Corporation (MR): Free Stock Analysis Report

Gulfport Energy Corporation (GPOR): Free Stock Analysis Report

Cabot Oil & Gas Corporation (COG): Free Stock Analysis Report

SilverBow Resources Inc. (SBOW): Free Stock Analysis Report

Original post

Zacks Investment Research
Why Gas Prices Fell 4% And What Should Investors Do Now
 
Why Gas Prices Fell 4% And What Should Investors Do Now

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments
Spencer Dardon
GreenGreta Sep 20, 2019 9:28AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Low 2s coming it sounds like.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email