The Natural Gas Bull is On, Is Your Portfolio Prepared?

The natural gas clock has been ticking bullish for too long, and there’s only so long it can sit on our mantle with a giant sign on it screaming, “We told you so!”

How far do we need to go back? How long has the natural gas sector been a screaming buy that’s gone largely ignored by the market? 

Look, I can’t say I blame the investment herd for missing the signs. That’s what they do, isn’t it? After all, we’ve had several warmer-than-usual winters leading up to this year. 

What’s more, and perhaps providing the most camouflage to our latest bullish sentiment, it has simply been the fact that the United States is flush with supply — and has been for more than a decade at this point. 

Last year, we produced 45.8 trillion cubic feet of natural gas!

The veterans of our investment community know that the oversupply of gas has both plagued us through keeping prices in the basement and has also been a huge boon for other areas of the gas sector. 

Remember, the fact that we’ve been pumping so much natural gas out of the ground has led to the U.S. becoming one of the world’s top LNG exporters. 

With the exception of our LNG fortunes, however, natural gas stocks have languished over the last few years. 

All they needed was that spark… and they might’ve just gotten it.

When I told you a few weeks ago that the energy king had returned, I meant every word. It turns out all it took to shake the natural gas market was one unexpectedly cold winter, which is precisely what we got over the last few months. 

Let me show you just how crazy things got for natural gas prices this winter; go ahead and take a look at how explosive prices have been since last December:

For the record, this is the highest we’ve seen prices at the Henry Hub since the fall of 2022, when the Nord Stream pipeline was sabotaged through a series of underwater explosions that rendered several pipes inoperable. 

But things have just begun ticking for this bullish clock. Harsh winters in North America and Europe led to stronger withdrawal from storage facilities, which have pushed inventories well below the five-year average. 

I know what you might be thinking, “The worst is over, right? We’ve finally hit spring, and the warm weather is already starting to set in. So what’s the worry?”

Fortunately for us, the summertime heat will make things even more interesting. You see, I don’t think most people realize how much we rely on natural gas for our energy demand. 

In 2023, natural gas accounted for roughly 41% of demand in the residential sector, energy which is used for heating and cooling, etc. 

However, it’s natural gas’ role in supplying the U.S. with electricity that should give you pause. Last year, it supplied us with 43% of our utility-scale electrical generation. That’s nearly double the total amount that renewables supplied — including wind, solar, and hydro. 

That’s not to downplay the role that renewables will play in our future, mind you, but only to highlight that demand NOW is powered through natural gas. 

Our demand situation is about to escalate, too, when you put certain other factors into play. 

The Department of Energy tried to warn us all in December, after it highlighted a report from the Lawrence Berkeley National Laboratory, which explained why U.S. electricity demand is about to surge higher. 

The culprit isn’t shocking, either. 

The race to develop AI technology will drive our power demand to new records, and demand from new data centers is accelerating. Shouldering that need for more power will be difficult enough for natural gas alone.