Oil Stocks are Pushing Back but Natural Gas Takes Front and Center

Brittney Barrett |

Oil StocksEnergy stocks have been in focus throughout the year, first because of their teetering highs and then for the speed with which they shed their excess weight. Yesterday, with oil beneath $100 a barrel, conversation turned to potential energy plays once more. While oil seemed to dominate conversation earlier in the year, energy bulls seem to be divided between oil and natural gas.

The NYSE Arca Natural Gas Index has been steadily climbing as natural gas stocks are pushed higher alongside recommendations from Energy gurus and a growing number of recognized uses. Among notable trends in the energy sector, natural-gas prices are being bolstered by sweltering heat on the east coast, pushing up cooling demands by as much as 30 percent for the coming week.

That trend in gas prices; however, doesn’t appear to be limited to the coming week. A report released by the International Energy Agency today could keep prices high for some time. According to the IEA; provided that natural gas pricing remains low and the government institutes effective regulations to ease the potential environmental impact hydraulic fracturing, natural gas use will continue to rise.

The trepidation toward nuclear power following the radiation disaster in Japan, alongside rising energy demands from emerging economies in China and India will result in a rising call for power in coming years. Unfortunately, oil is expensive, and while the global demand will likely push prices higher, it may be the beginning of a heyday for natural gas. The report asserts natural gas could account for 25 percent of the global energy breakdown by 2035, a four percent increase from current levels.  Natural gas, which burns cleaner than its fossil competitors, may end up displacing present coal use, nuclear energy and the still expensive alternative sources like solar and wind. Anticipating the rise, there has been a notable increase in the development of gas fields from unconventional sources like shale rock.

While there remains environmental factors that limit this type of development, according to the IEA chief, proper regulations will help reduce issues related to water and chemical use. Worries over greenhouse gas issues are founded, but quality operational demands will be placed on companies to minimize damage.

Among the natural gas investments that have begun to garner attention is Range Resources (RRC). The company, which has a massive reserve of natural gas resources, is suspected to be under observation from larger oil and gas outfits. Typically, these companies would pay a dollar amount on r natural-gas resources, or untapped underground deposits. According to BlackRock’s Dan Rice, that means Range has a worth of $115 a share versus its going stock price of $53.

Essentially, Rice asserts that should the Obama administration, which has been attempting to cut back on foreign oil imports, decide natural gas should be more heavily pursued, major oil companies will begin acquiring smaller natural gas funds. Already, the trend toward natural gas is emerging. Exxon Mobil (XOM), made the most profits from its bourgeoning natural gas division in Q1, 2011.

Exxon Mobil represents a happy medium between investors unsure on where energy is headed next. Exxon Mobil has been lower in recent trading, alongside other major oil companies.

There were; however, exceptions. Sunoco Inc. (SUN) has been pushing higher, after reaching near its 52-week low in Monday.  Hess Corp. (HES) also bucked the recent weakness after announcing that Paradise-1 exploration well, off the coast of Ghana drilled to a total depth of 16,436 feet. Hess has a 90 percent interest in the well, which tapped into 490 feet of oil and gas condensate.

Halliburton Co. (HAL) also pushed higher, though only marginally from its Monday lows. Earlier in the week, the Supreme Court in favor of proceeding with a securities-fraud case facing the oil goliath.

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
UE Urban Edge Properties of Beneficial Interest 26.91 0.14 0.52 419,238
RRC Range Resources Corporation 36.36 -0.23 -0.63 3,669,015
SUN Sunoco LP representing limited partner interests 24.51 0.76 3.20 1,164,414
HAL Halliburton Company 54.17 0.93 1.75 7,174,924

Comments