Natural gas is a staple resource, but with growing tensions between Russia and the West, speculating on natural gas stocks has grown in popularity. Let’s take a look at natural gas companies, the current landscape and the best natural gas stocks to add to your watchlist.
Jump ahead using these links:
- What is natural gas?
- How is natural gas sold on the stock market?
- Is now a good time to buy natural gas stocks?
- How to buy natural gas stocks
- How to short natural gas stocks
- Best natural stocks 2022
Please note, all the information in this article was correct at the time of writing on 14/09/2022.
What is natural gas?
Natural gas is a source of energy used for heating and powering homes all over the world. Technically, it’s still classed as a fossil fuel, but it’s considered a ‘bridge fuel’ as it’s one of the cleanest and most naturally abundant fossil fuels.
Normally, natural gas is bought and sold on the commodities market via futures contracts. With City Index, you can speculate on the price of natural gas via commodity CFDs.
Learn more about trading natural gas
How is natural gas sold on the stock market?
Natural gas isn’t sold on the stock market; however, you can trade the shares of companies involved in the sector or buy ETFs that track the commodity or a collection of gas stocks.
Learn more about shares trading
Broadly, natural gas companies are divided into three categories:
- Upstream – the businesses that explore for, drill and extract gas
- Midstream – the businesses that handle and transport the gas
- Downstream – the businesses that refine, distribute and sell gas to consumers
As investing or trading natural gas stocks doesn’t give you direct exposure to the underlying commodity, you’ll need to be aware of the other factors that can influence the value of your shares – such as company earnings, supply chain disruption and broader economic conditions.
However, you can also buy and sell shares in Natural Gas funds, which track the price of commodity futures. For example, the ETFS Natural Gas tracks the price of the Bloomberg Natural Gas Subindex Total Return – formerly the Dow Jones-UBS Natural Gas Subindex Total Return – which composes of futures contracts on Natural Gas.
Is now a good time to buy natural gas stocks?
In 2022, growing domestic demand and the geopolitical tensions between Russia and the West have benefitted a lot of natural gas stocks.
After Russia invaded Ukraine in early 2022, the US and its allies imposed a series of sanctions aimed to cripple the Russian economy and force Putin’s withdrawal. But, in response, the Kremlin has essentially stopped all exports of natural gas – and given that in 2021, Russia supplied the EU with 40% of its natural gas, this move is crippling economies across Europe.
For consumers and businesses reliant on natural gas, this has created an energy crisis that could plunge households into debt over winter. But, for natural gas companies, it’s lead to increased demand, which has seen share prices rocket across the industry.
For example, the STOXX Europe 600 Oil & Gas index – which tracks large, mid and small cap stocks across the industry in European countries – has risen by 20% this year so far, and over 27% over the last 52-weeks.
The industry is expected to continue growing, even if the tensions with Russia dissipate, because it’s the cleanest fossil fuel. However, share prices could see a lot of volatility in the meantime.
As we near a recession, historic price patterns tell us that oil demand could fall as transport declines and infrastructure project starts fall. Given the current energy crisis, it feels like there can’t possibly be a way out of the desperate demand we’re seeing, but a recession could outweigh the Russian supply shock and send energy prices back down to pre-2022 levels.
If this happens, we may see a shift in conversation away from buying natural gas stocks, toward the selling side.
Learn how to trade a recession
Whatever direction natural gas stock prices move in, you can take your position with City Index. Contracts for difference (CFDs) enable you to take both long (buy) and short (sell) positions, taking advantage of rising and falling share prices.
Let’s look at how in more detail.
How to buy natural gas stocks
To buy natural gas stocks via CFDs, you’ll need to:
- Research which company’s shares you want to buy
- Open the City Index platform and locate the market
- Fill out the deal ticket by setting your direction – in this case, buy – and your stake size
- Attach stops and limits to manage your risk
- Hit ‘Place trade’
Once your position is on the market, you’ll have to monitor for changes and look for the best exit point.
How to short natural gas stocks
Traditionally, to short natural gas stocks you’d have to borrow the security from a third party, sell it at the current market price and buy it back later. You’d be hoping that the share price would fall in value, and you can buy it back for less. So, when you return it to its owner, you can pocket the difference.
But, thanks to the rise of derivatives, shorting stocks is as straightforward as going long.
To short natural gas stocks via CFDs, you’ll need to:
- Research which company’s shares you want to short
- Open your City Index platform and locate the market
- Fill out the deal ticket by setting your direction – in this case, sell – and your stake size
- Attach stops and limits to manage your risk
- Hit ‘Place trade’
Best natural gas stocks 2022
There are a lot of key players across the natural gas industry, so we’ll only look at a few of the most popular stocks of the year by market capitalisation.
- Cheniere Energy
- EQT Corporation
- Ovintiv Inc
- Antero Resources
- Southwestern Energy
However, there are a huge range of other natural gas stocks you could choose to trade. Search the 4,700+ global shares available to you with City Index through our platform.
- Ticker: LNG
- YTD % change: +60.16
- Market cap: $41.38 billion
Cheniere Energy is the largest liquified natural gas (LNG) producer and exporter in the US, which explains why the company has nabbed the ticker LNG. It has end-to-end capabilities, which means it sources, transports, liquefies and delivers the commodity.
Cheniere has a predictable cash flow because it sells most of its LNG under long-term, fixed-rate contracts. These are expected to produce $10 billion in annual cash flow through to 2024.
In the first six months of 2022, Cheniere exported 316 LNG cargoes, up from 272 in the same period of 2021. The company also delivered 70% of its export cargoes to Europe, addressing the energy security fears of the region.
- Ticker: EQT
- YTD % change: +117.97
- Market cap: $17.72 billion
EQT Corporation is another big name in the natural gas sector, and another company currently benefitting from Russia cutting off supply from regional partners. It’s already the largest natural gas producer in the US and is rumoured to be looking to invest in liquefaction capacity as demand grows.
In Q2 2022, EQT generated revenue of $3.37 billion, up three times from the same period in 2021. It also posted net income of $891 million, compared to a net loss of $933 million in Q2 of 2021. The company expects to produce more than $10 billion in cumulative free cash flow through 2026.
- Ticker: OVV
- YTD % change: +47.14
- Market cap: $13.13 billion
Ovintiv is one of the US’s oldest oil and natural gas producers – formerly named Encana – based in Colorado. It’s involved in end-to-end activities, including exploration, development, production and marketing of natural gas, oil and natural gas liquids (NGLs).
In Q2 2022, Ovintiv beat analysts’ expectations of revenue, with the real figure coming in at $3.74 billion compared to estimates of $2.66 billion, thanks to the company’s increased production outputs.
- Ticker: AR
- YTD % change: +123.81
- Market cap: $12.20 billion
Antero Resources is a hydrocarbon exploration company based in Colorado. It extracts assets via hydraulic fracturing.
In April 2022, Seeking Alpha reported that Antero expects to ‘be able to more than double the amount of natural gas that it exports to supply markets’, which is why it’s gathering a lot of attention.
In Q2 2022, AR posted sales of $2.35 billion – which was more than double the previous year – and a net income of $765 million up from a net loss of $523 million for Q2 2021.
- Ticker: SWN
- YTD % change: +60.15
- Market cap: $8.57 billion
Southwestern Energy is a natural gas exploration and production company, based in Delaware. The company is perhaps most known as a pioneer in the conversation around more responsibly sourced natural gas.
It notably gained attention this year for announcing a deal to supply responsibly sourced gas to Germany’s Uniper North American subsidiary. The deal signals that despite the concerns in Europe over gas shortages, companies are still seeking more environmentally-friendly solutions – which Southwestern Energy President and CEO Bill Way believes natural gas is the answer to.
In Q2 2022, Southwestern reported revenues of $4.14 billion, up 294% from the year before, and net income of $1.17 billion – up 292% from 2021.