Trend: Demand for natural gas could boost the prices of natural gas stocks soon.
Keith Kohl at Energy and Capital sees natural gas stocks rebounding as winter increases demand. Excerpts below.
Link: Top Natural Gas Stocks.
The first question to address is where natural gas prices are headed.
In the wake of oil's fall from grace since July, natural gas has also declined from record highs. However, unlike oil, I believe we are a lot closer to bottom for natural gas prices.
Although we are still 2% above the 5-year average, the latest 64 Bcf drop from storage was enough to give us pause. Analysts had only anticipated a drop between 43 billion to 48 billion cubic feet.
Now take a few other factors into account...
Winter is no longer around the corner, it's here. If they haven't already, people will start turning the heat on. As a result, storage levels will continue dropping. If the temperature begins to drop as we move through the winter season, heating demand will inevitably rise.
Top Natural Gas Stocks
Even though I've mentioned these stocks in the past, there's one thing they all have in common. All three have been oversold during this tumultuous market. If you've been looking for a window to jump into one of these three stocks, now is your chance.
Here's the three top natural gas stocks:
Devon Energy Corp. (NYSE: DVN): With over 2 Bcf of production per day, Devon covers approximately 3% of all the gas consumed in the U.S. In 2009, I expect the 580,000 net acres in the Haynesville shale will come in handy when they look to replace production from aging Barnett fields.
EOG Resources (NYSE: EOG): EOG has dipped their hand in nearly every major basin I've covered. I'm particularly interested in their Horn River Basin play in Canada. The Horn River Basin has been compared to the Barnett shale in Texas.
Range Resources (NYSE: RRC): This is one of the first stocks that comes to mind whenever I think of the Marcellus shale play. Last week, Range reached a production milestone of 400 million cubic feet per day.
Although energy stocks have taken a beating during the second half of 2008, my bullish outlook for natural gas in 2009 hasn't changed in the slightest.