Natural Gas Prices Tick Up Despite Another Triple-Digit Build

Natural gas futures edged up to $3.447 per Mcf despite the EIA reporting a larger-than-expected storage build of 101 Bcf, marking the fifth consecutive week of triple-digit increases and exceeding the five-year average. While production remains high and power demand is weakening, traders are taking some encouragement from slightly stronger demand signals. The article suggests focusing on well-positioned gas stocks such as Expand Energy (EXE), Gulfport Energy (GPOR), and Antero Resources (AR) amid the oversupply and seasonal demand shifts.

Analysis

Natural gas futures experienced a modest increase, settling at $3.447 per Mcf, despite the Energy Information Administration (EIA) reporting a storage build of 101 billion cubic feet (Bcf) for the week ending May 23. This injection exceeded analysts' forecasts of 99 Bcf and marked the fifth consecutive week of triple-digit increases, pushing total natural gas stocks to 2,476 Bcf, which is 3.9% above the five-year average but 11.3% below 2024 levels at the same point. The oversupply situation is exacerbated by total natural gas supply averaging 112.5 Bcf per day, up 0.7 Bcf per day weekly due to higher Canadian shipments, while daily consumption fell to 97.3 Bcf from 98.1 Bcf, driven by weakening power demand as electricity output declined 4.4% year-over-year. Although LNG exports edged up to 14.4 Bcf/day, global demand signals remain muted. The market sentiment is predominantly bearish due to persistent oversupply and soft demand, though a slight uptick in prices and demand signals offered minor encouragement. A potential demand increase is anticipated with warmer weather in late June. Amid this environment, Expand Energy (EXE), Gulfport Energy (GPOR), and Antero Resources (AR), all holding a Zacks Rank #3 (Hold), are highlighted for their strong fundamentals. EXE, now the largest U.S. natural gas producer, forecasts a 444.7% year-over-year EPS surge in 2025. GPOR, focusing on free cash flow post-restructuring, projects a 61.7% YoY EPS increase for 2025. AR, with extensive low-cost drilling inventory, anticipates a 1,485.7% YoY EPS growth in 2025.

Key Decisions for Investors

• Investors should maintain a cautious stance on the broader natural gas market due to current oversupply and weak demand fundamentals, while closely monitoring upcoming weather patterns and EIA storage reports for shifts in market balance.
• Consider evaluating specific natural gas producers such as Expand Energy (EXE), Gulfport Energy (GPOR), and Antero Resources (AR), which exhibit strong projected earnings growth for 2025 and possess solid operational fundamentals, despite their current 'Hold' ratings and the challenging market conditions.
• Factor in the potential for increased natural gas demand later in the season from warmer weather and any upticks in LNG export activity when assessing positions, but balance this against the prevailing high storage levels and robust production.