On Monday, oil and gas prices reached record heights after the Organization of the Petroleum Exporting Countries (OPEC) said it is sticking to its plan to gradually resume production volumes. This news has worried investors as it makes it likely that the oil supply will remain low for the remainder of the year.
The OPEC reduced oil output at the start of the pandemic by keeping millions of barrels off the market. Despite the demand for oil returning to complete normality, the organization is still planning to slowly return to regular volumes.
As a result, natural gas stocks have risen in popularity. Prices are currently trading at levels not witnessed since 2014 and In the U.S., were up 5.5% on Monday. As demand increases in the colder months as populations use more heat and electricity in the darker, colder months, the combination of everything makes it a great time to buy natural gas stocks. However, the gas supply is lower than in previous years due to drought in Latin America and a hurricane in the Ida, U.S.
Natural gas prices are up a whopping 132.3% year-to-date. In the same time frame, the biggest natural gas benchmark, the United States Natural Gas ETF (NYSEARCA: UNG) is up 109%.
So to play the natural gas boom, here are some top stocks in the field.
1. Cabot Oil & Gas
To get a double whammy effect on your portfolio, investors can get exposure to natural gas whilst benefiting from rising oil prices by purchasing shares in oil companies that are also big gas producers. One such company is Cimarex Energy (NYSE: XEC) who is about to merge with Cabot Oil & Gas (NYSE: COG), both of which are top stocks in the natural gas market.
Analysts believe that the company now has an attractive free cash yield and is trading at good buy-in compared to its competitors. Shares have dropped slightly since the merger announcement which often happens but it is still looking like a good long-term investment.
Natural gas already makes up most of Cimarex’s production and these volumes are expected to continue to climb after its merger with Cabot, which is another big natural gas producer.
2. Cheniere Energy
To get in on the natural gas supply chain space, investors should check out Cheniere Energy (NYSE: LNG). It is an energy infrastructure company whose terminals are on the Gulf Coast which allows U.S. gas to be processed and shipped abroad.
As more households and businesses move towards cleaner energy sources, Cheniere offers natural gas which brings the advantages of being the cleanest-burning hydrocarbon and produces half the greenhouse gas emissions of coal.
Experts expect demand for the company’s resources to climb 3.4% yearly through 2035, offering huge potential for high returns. Demand for natural gas to use in a power generation capacity is estimated to increase sharply too. With most of this demand coming from overseas markets in Asia, Cheniere’s global expansion opportunities could be endless.
Analysts predict that the company will be very busy, stating that Cheniere will report record free-cash-flow growth in the near future.
With shares up over 70% year-to-date, and estimated to keep rising, this could be a great natural gas stock to add to your portfolio.
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Content Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.