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Tickers in this Article: UNG, USO, XOM, APA, CHK, APC
After a titanic collapse, natural gas is beginning to show signs that it has found its bottom.

On Tuesday, natural gas futures hit their highest point in 3 months, as investors began to bet on a long-term recovery. Since hitting a new 52-week low of $12.69 on April 30, the United States Natural Gas Fund (NYSE:UNG) has rallied over 30%.

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A Long Road Ahead
I am somewhat skeptical about the sustainability of this natural gas rally in the short-term, although I do think that natural gas can outperform oil as the United States Oil Fund ETF (NYSE:USO) has already risen about 42% since hitting its own low point in late February. Neither one of these rallies have had much behind them in terms of fundamental improvements.

The price of natural gas is coming off a six-year low that was reached in late April as U.S. inventories have continued to build. And it was only last week that the Energy Department reported that crude inventories had hit their highest level since 1990. Fortunately, some in the natural gas industry are confident in a long-term turnaround.

Management Looking Ahead
In recent days, Exxon Mobil (NYSE:XOM) CEO Rex Tillerson has said that he expects there to be "significant demand" for the commodity in the U.S., as the economy begins to regain its footing. Apache (NYSE:APA) CEO G. Steven Farris hinted that his company may be on the lookout for opportunity in the form of acquisitions when Apache's Q1 results were announced. And Chesapeake Energy (NYSE:CHK) has cited the upward trending slope of the NYMEX natural gas futures curve as an incentive to defer production to future periods when prices may be higher.

Those looking to invest in natural gas companies will want to make sure that the companies that they are investing in have a balance sheet strong enough to weather the industry's depressed prices. Earlier this week Anadarko Petroleum (NYSE:APC) raised about $1.47 billion in a secondary offering that would enhance the company's liquidity position. This move is prime evidence of the adversity that these natural gas players have faced.

The Bottom Line
Natural gas has come back to life this month, although it is still trading at a far cry below its high from last summer. Demand is still week, but current expectations that have been priced in to natural gas might be overly pessimistic. For investors with a long-term perspective, UNG or companies with natural gas exposure might be worth a closer look. (Read Oil and Gas Industry Primer to learn more about the industry.)

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