The Wall Street Journal (“Heardon the Street”) fully describes the situation and outlook with “The situation in the natural gas market looks unnatural.”
- Supply struggles to keep up with high global demand
- Unusually low inventory needed to meet the surge in winter demand
- Uncertainty surrounding winter effects is heightened by unknown climate change
In this situation, “uncertainty” is an investor’s friend.That means a normal rise in winter demand Can be Abnormally high. Therefore, as currently being discussed, it is up to the price to cure the winter mismatch:
Natural gas lies between social, environmental and political rifts
The ranking of desirability is almost clear:
- Sun and wind-yes, absolutely
- Hydro and Nuclear-Yes, but …
- Oil-No, but …
- Coal-No, absolutely
“Clean combustion” natural gas? Yes? After all, it’s where utilities have sought coal. And there are all those home appliances, stoves and water heaters. And what about the environmental movement, “This car uses natural gas as fuel”? In addition, natural gas is a necessary by-product of oil production. And there is a natural underground storage area. Large-scale investment in LNG facilities is being made. LNG carriers are a greatly expanding business. Most importantly, all of this benefits the US economy.
Therefore, natural gas will probably be ranked as “OK for now”. So don’t worry about Biden’s debate about trampling on natural gas anytime soon:
Forbes (9/9): “Natural gas producers are on track, Biden can be an obstacle”
Conclusion: Potential stock price increases due to rising natural gas prices can be significant
Rising commodity prices can significantly increase producers’ profits and free cash flow. Even seasonal boosts can ratchet the financial and operational well-being of a company. Most importantly, increasing funding can improve future growth prospects.
For equity investors, profits can be just as great, even before the results come out. It is the prediction of the event that can increase investor excitement and stock prices prior to actual results, especially when there is the potential for a major storm.
In other words, it looks like a good time to invest in natural gas producers.
Disclosure: Author purchased First Trust Natural Gas ETF on September 13th