Back to top

Image: Bigstock

Natural Gas Gains for the Week But Remains Well Supplied

Read MoreHide Full Article

The U.S. Energy Department's latest inventory report showed a lower-than-expected increase in natural gas supplies. Following this positive data, futures ended the week 6% higher.

However, natural gas is expected to remain volatile, depending on the weather outlook, supply/demand balance etc. In such a situation, investors should focus on resilient stocks like Cheniere Energy (LNG - Free Report) , Range Resources (RRC - Free Report) and Shell plc (SHEL - Free Report) .

Natural Gas Build Smaller Than Market Expectations

Stockpiles held in underground storage in the lower 48 states rose 42 billion cubic feet (Bcf) for the week ended Nov. 8, below analysts’ guidance of a 44 Bcf addition. The increase compared with the five-year (2019-2023) average net injection of 29 Bcf and last year’s growth of 41 Bcf for the reported week.

The weekly build put total natural gas stocks at 3,974 Bcf, 158 Bcf (4.1%) above the 2023 level and 228 Bcf (6.1%) higher than the five-year average.

The total supply of natural gas averaged 107.5 Bcf per day, down 0.3 Bcf per day on a weekly basis, due to lower dry production partly offset by higher shipments from Canada.

Meanwhile, daily consumption rose to 106.9 Bcf from 101.4 Bcf in the previous week, mainly reflecting higher residential/commercial usage and an increase in deliveries to U.S. LNG export facilities.

Natural Gas Prices Finish Higher

Natural gas prices rose last week following a smaller-than-expected inventory build. December futures closed at $2.823 on the New York Mercantile Exchange, marking a 5.8% increase. 

However, even with this gain, one has to consider the current natural gas supply surplus and the lingering uncertainty associated with it. With current inventories remaining above both last year’s levels and the five-year average, the rally can be short-lived. The relatively mild weather and demand for light heating are other factors to contend with.  Investors must remember that natural gas prices dipped to a four-month low of $1.88 in late August, underscoring the market's ongoing volatility.

How Should Investors Play Natural Gas Stocks?

The natural gas market continues to struggle with oversupply, along with shifts in weather and production dynamics. As such, investors should remain cautious. Focusing on fundamentally strong stocks like Cheniere Energy, Range Resources and Shell plc —each carrying a Zacks Rank #3 (Hold) — may offer more stability amid the uncertainty.

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

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 enjoys a distinct competitive advantage.

Cheniere Energy beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. The natural gas exporter has a trailing four-quarter earnings surprise of roughly 87.5%, on average. LNG shares have moved up 22.2% in a year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Range Resources: The company is an U.S. independent natural gas producer with operations focused in the Appalachian Basin. Range Resources’ large contiguous acreage position provides more than 30 years of low-breakeven, high-return inventory. The company produced 202.8 Bcfe from these assets in the third quarter of 2024 — 68% natural gas.

Range Resources beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The upstream operator has a trailing four-quarter earnings surprise of roughly 28.8%, on average. RRC shares have edged up 0.5% in a year.

Shell: Shell’s long-term strategy revolves around LNG. This London-based firm bought BG Group for $50 billion in 2016 to become the world’s largest producer and shipper of LNG. With LNG export demand likely to rise significantly in the near-to-medium term, Shell’s position as a major supplier should help it meet the fuel’s growing demand.

SHEL beat the Zacks Consensus Estimate for earnings in each of the last four quarters. This natural gas exporter has a trailing four-quarter earnings surprise of roughly 15.4%, on average. Shell shares have lost 1.8% in a year.


Zacks' 7 Best Strong Buy Stocks (New Research Report)


Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.


Click Here, It's Really Free

Published in