Regional natural gas markets in the United States are seeing prices for this winter surge along with global record highs – suggesting that the energy bills causing headaches in Europe and Asia will hit the world’s top gas producer before long.
Gas prices in Europe and Asia have more than tripled this year, causing manufacturers to curtail activity from Spain to Britain and sparking power crises in China.
The United States has been shielded from that global crunch because it has plenty of gas supply, most of which stays in the country since U.S. export capacity is still relatively small.
The benchmark U.S. natural gas contract has been rallying, lately hitting seven-year highs, but its $5.62 per million British thermal units (mmBtu) price is a far cry from the $30-plus being paid in Europe and Asia.
Natural Gas Supply Chain
The analyst says another way to play these dynamics is by buying stocks of companies that are key cogs in the global natural gas/LNG supply chain.
His top pick here is Cheniere Energy (NYSE:LNG), whose terminals on the Gulf Coast allow U.S. gas to be processed and shipped overseas. Cheniere Energy, Inc., an energy infrastructure company, engages in the liquefied natural gas (LNG) related businesses in the United States.
Dingman says some petrochemical companies could benefit from the natural gas boom, too. He says chemical plants with operations in the U.S. are in better shape because they’re paying relatively less.
His top picks here are:
Dow Inc. (NYSE:DOW) – Dow Inc. provides various materials science solutions for consumer care, infrastructure, and packaging markets in the United States, Canada, Europe, the Middle East, Africa, India, the Asia Pacific, and Latin America. It operates through Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials and Coatings segments.
According to analysis, companies that are central to the natural gas supply chain, particularly LNG companies, can provide investors with great exposure to the current price rally.