Is It Good to Invest in Natural Gas?

Is it good to invest in natural gas?

Anyone with a dime invested in energy stocks over the past few years has asked themself this question at some point or another. 

Back in 2022, natural gas catapulted into the energy spotlight after Russian tanks started rolling into Ukraine. We watched as spot prices at the Henry Hub soared to nearly $9 per million British thermal units (MMBtu) — almost tripling year-over-year! 

The winners back then were clear, too. Shares of major natural gas producers like EQT Corp. (NYSE: EQT) surged more than 122% between February and August of 2022. 

It turns out that Putin was serious about cutting natural gas exports to Europe, which led EU members to heavily rely on U.S. LNG to heat, cool, and power their homes during the winter; remember, roughly 40% of Europe’s gas demand is used by the residential sector. 

A lot of investors were left on the sidelines for that run and for good reason. The flood of supply that had poured into the U.S. after the shale boom erupted, caused prices to fall precipitously. By the time the COVID lockdowns hit in the summer of 2020, natural gas prices had fallen to under $2 per MMBtu. 

So now here you are, once again asking yourself if natural gas is a good investment. 

The answer is YES. 

Why It’s Good to Invest in Natural Gas

I’ve called natural gas an underdog investment in 2024 two times this year, once back in March, and again in May. We even nailed down some of the best natural gas stocks with dividends a week ago. 

Well, the investment thesis for natural gas hasn’t changed, it’s gotten better — and the Energy Information Administration just said the quiet part out loud. 

The idea is simple: Natural gas is arguably the best bridge to use when transitioning to cleaner energy. And the reason why comes down to one thing — electric power. 

The EIA’s latest Short-Term Energy Outlook 2024 paints a very bullish picture for natural gas heading into next year. According to their data, our power sector generated 5% more electricity during the first half of 2024 compared to the same period a year ago. 

Not only are we dealing with hotter-than-expected summer temperatures, but power consumption in the commercial sector is now officially higher than it was pre-COVID, thanks to a surge in electricity demand from data centers and crypto mining operations. 

And if you’ve happened to forget who is the king of U.S. energy consumption, it’s oil and natural gas:

The EIA is also forecasting more coal usage in the United States as natural gas prices climb, but what’s interesting here is that we won’t have the coal industry to fall back on for much longer. 

Never overlook the fact that not only are our current fleet of coal plants over four decades old, but it also accounts for a huge amount of our electric generating capacity retirements from here on out.

“But what about that pesky oversupply,” you ask?

There’s a few catalysts to consider there. 

For starters, natural gas producers in the U.S. have been curtailing production this year in order to stabilize prices, which means they’re drilling less. Couple this lower output with strong demand, and we’re already seeing a dent in natural gas inventories. 

The EIA reported that U.S. gas storage inventories were 19% above the five-year average; keep in mind that inventories were 39% above the five-year average at the end of the withdrawal season at the end of March. 

Then again, the EIA is also forecasting that flat production and a boost in summer demand, as well as stronger LNG exports, will lead to natural gas prices rising 41% to $3.30 per MMBtu.

Tighter supply/demand fundamentals, rising prices, and a dominant position in the United States’ energy dynamic…

I couldn’t think of a better sleeper investment pick during the second half of 2024. 

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

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