This Is Why Natural Gas Stocks Have Been Surging Lately

In This Article:

Key Takeaways

  • Natural gas prices jumped more than 9% Monday, the biggest one-day gain in eight months.

  • CRK, AR, EQT and RRC are seeing notable increases in their share price as a result.

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Natural gas futures have been climbing steadily toward the $3/MMBtu mark, a key psychological level fueled by multiple catalysts. The commodity jumped 9.4% on Monday alone, its biggest one-day gain in eight months. December futures closed at $2.91 on the New York Mercantile Exchange yesterday. This upward momentum has also boosted gas-focused stocks, with companies like Comstock Resources CRK, Antero Resources (AR), EQT Corporation EQT and Range Resources RRC seeing notable increases in their share prices.     

Let's take a closer look.

4 Reasons Why Natural Gas Prices Surged

Hurricane Rafael and Production Disruptions in the Gulf of Mexico: Natural gas prices have surged in response to supply disruptions caused by Hurricane Rafael, which temporarily cut production by approximately 16% in the Gulf of Mexico. This unexpected shutdown removed around 310 million cubic feet of daily production from the market, tightening supply when the demand for natural gas is already high. As Gulf facilities gradually come back online, any delay in restoring full production could keep prices elevated, especially if additional storms impact the region in the coming months.

Colder Weather Forecasts: As winter approaches, forecasts for colder-than-expected weather across the United States are fueling expectations of increased heating demand. The Energy Information Administration (“EIA”) reported a 2.7% rise in natural gas consumption in response to these forecasts. In colder conditions, utilities typically ramp up withdrawals from storage to meet residential and commercial demand. Despite storage levels currently sitting above the five-year average, the start of withdrawals has already added upward pressure on natural gas prices. If colder weather persists, prices could continue their bullish trend, signaling strong seasonal demand.

Rising LNG Exports and Tightening U.S. Supply: International demand for U.S. liquefied natural gas (“LNG”) has seen a steady increase, with Europe, in particular, relying heavily on American LNG to replace reduced Russian supplies. U.S. LNG exports are now nearing record highs, averaging around 13 billion cubic feet per day. This strong demand for exports, combined with declining domestic production, has tightened the market. Analysts note that domestic supply recently fell to 100.1 billion cubic feet per day, the lowest since the start of the year, further supporting higher prices as supply becomes stretched between local and international needs.

Reduced Renewable Output: Lower wind speeds across the United States and Europe have reduced renewable energy output, pushing more demand onto natural gas-fired power plants to meet electricity needs. This phenomenon, known as "dunkelflaute" in Europe, has driven utilities to increase their reliance on natural gas, further supporting prices. As renewable output remains variable, natural gas continues to be a reliable alternative, reinforcing its essential role in the energy mix and keeping prices elevated in both the United States and Europe.

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