We’ve remained bearish on US natural-gas prices for the past several years, asserting that any short-term rallies induced by a cold winter would fail when prices approach $4 to $5 per million British thermal units.
The floor for the commodity sits around $2 per million British thermal units, though elevated inventories and production levels suggest Henry Hub prices could fall below this threshold this winter.
Nothing on the horizon suggests that US natural-gas prices will escape this trading range, while the near-term risks skew decidedly to the downside.
We expect front-month prices at the Henry Hub, the official delivery point for natural-gas futures that trade on the New York Mercantile Exchange, to struggle to top $3 per million British thermal units in 2016. The thermal fuel could also tumble to $1 per million British thermal units or less if a warm winter swells the volume of natural gas in storage.
In this issue, we delve into a handful of popular gas-focused producers, but opt to stand aside on even our favorite names for now. However, a buying opportunity could emerge in coming months if this winter ends up being warmer than usual.
We’re more bullish on midstream names that stand to benefit from growing demand for US natural gas at home and in Mexico.
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In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Jun. 30, 2020
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