Are Natural Gas Stocks About to Heat Up?

LNG Tanker

One of the more unusual aspects of the current conflict in the Middle East is Iran’s tactic of involving neighboring countries. Saudi Arabia, the United Arab Emirates, Bahrain, and a half-dozen other countries have felt Iran’s wrath in the form of missiles and drones aimed at military bases, airports, and energy infrastructure.

Qatar, located directly across the Strait of Hormuz from Iran, houses a U.S. air base, making it a target. Slightly larger than the state of Delaware, Qatar is also home of Ras Laffan Industrial City. 

Natural Gas Production Halted

Las Raffan is the world’s largest export complex for liquified natural gas (LNG). That complex has been forced to halt production due to drone attacks, leading to a declaration of force majeure.

In the U.S., the world’s largest producer of natural gas, LNG prices haven’t changed dramatically. However, European natural gas prices are skyrocketing.

This is demonstrated on the chart below. On the left is the United States Natural Gas Fund LP  (UNG) , which has gained 2% year-to-date. On the right, we see Dutch TTF Natural Gas futures, which have nearly doubled since the start of this year. 

The reaction of individual natural gas stocks to the Middle East conflict has been mixed. Some names have languished, while others are breaking out. We combed through the charts to find our top picks in the natural gas sector right now.

Kinder Morgan

Kinder Morgan  (KMI)  has gained over 20% year-to-date, and recently pulled back after reaching its highest level since 2016 (arrow). The recent decline has lowered its RSI (relative strength index) indicator from overbought levels (circled). 

GRADE: B+

EQT Corporation 

EQT  (EQT) , a Pittsburgh, PA-based C-Corporation, is one of the largest natural gas producers in the Appalachian Basin.

Technically, EQT is on the verge of a breakout. EQT has formed a large ascending triangle pattern, as shown below on its weekly chart (black dotted lines). 

GRADE: B

Cheniere Energy

Houston-based Cheniere Energy  (LNG)  is on the verge of an all-time high. On its weekly chart, we see Cheniere attempting to climb above the only area of resistance remaining on its chart (black dotted line). Earlier this week, Cheniere reached an all-time closing high of $255. 

GRADE: B-

Bottom Line

Ultimately, the length and breadth of the current Middle East conflict will impact the above names. The U.S. projects this conflict to last four to six weeks, while Iran has given no indication that it plans to surrender. Investors should use caution, as the unpredictable nature of this conflict has already created dramatic shifts in energy prices. 

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At the time of publication, Ponsi had no positions in any securities mentioned.