Natural Gas Surge Sparks Investment Potential: 4 Stocks to Consider

Natural Gas Surge Sparks Investment Potential: 4 Stocks to Consider

Posted On October 17, 2023 9:47 am

Natural gas prices are making a solid comeback after deferring to oil throughout the year. Industry experts speculate that shares of gas production companies may soon outshine those of their oil-focused counterparts.

After surging to almost $100/barrel on September 27, global crude prices have suffered a hard fall due to dwindling global demand. Efforts to stimulate price growth through supply cuts are proving ineffective.

The Chinese economy, undergoing a challenging period, weighs on the country’s energy consumption. China now relies on record inventory levels accumulated earlier this year as refiners reduce their purchases following the oil price escalation to over $80/barrel.

Europe’s economy is also under strain since Russia’s invasion of Ukraine disrupted European energy supplies. Meanwhile, U.S. domestic producers have boosted production, anticipated to reach 12.8 million barrels daily this year. Domestic oil demand in the U.S. has decreased due to reduced driving habits, further pushing down oil prices.

Natural gas futures have remained exceptionally volatile due to ongoing worries surrounding supply and demand factors. Prices tipped over $3 following a lower-than-projected inventory build-up.

Let’s see what’s favoring the natural gas price rise…

Favorable Demand

Increased demand during the sweltering summer months resulted in higher usage of air conditioning systems, leading to more electricity production powered by natural gas.

The anticipated colder winter seasons due to the El Niño weather pattern should necessitate additional heating, triggering more demand for natural gas.

Additionally, following the trade deal between Mexico and the U.S., the rising demand for gas from Mexico should further boost the natural gas industry.

Constrained Supply

Despite an initial surplus of natural gas at the beginning of the year, U.S. producers have significantly reduced operations due to declining prices. The number of natural gas rigs in operation has dropped by over 20% since May – a factor likely to provoke increased growth for natural gas futures.

Against this backdrop, let’s understand why industry players Hess Corporation (HES), APA Corporation (APA) California Resources Corporation (CRC), and Obsidian Energy Ltd. (OBE) could be considered.

Hess Corporation (HES)

With a market cap exceeding $47 billion, HES, a prominent natural gas provider to the United States, Guyana, Peninsular Malaysia and Thailand, could experience growth in revenue and profitability amid rising natural gas prices.

The prevailing oil price scenario, highly encouraging and anticipated to persist, is expected to foster an advantageous business climate for HES’ exploration and production activities, particularly in the Gulf of Mexico and offshore Guyana.

HES possesses a notable reserve of premium drilling sites within the Bakken shale play. With a planned four-rig drilling initiative within this area, HES forecasts bringing 110 new wells in 2023, strengthening its production outlook and further accelerating profitability.

Remarkable oil discoveries in the Stabroek Block, situated offshore Guyana, contribute to over…

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