Guidance & Visibilty

[madrose1]

NatGas , who wins & who loses


COMDX Commodities Trader: Trading opportunities likely arising with the recent downtrend in natural gas pricesWhether natural gas prices are rising of falling, some industries are either benefitting or getting hurt on both ends.

Who benefits when natural gas prices decline? Any company that uses natural gas as an input in making a product benefits when natural gas price decline. Also, any industry that competes with natural gas on a product level, such as in the coal space, loses out when nat gas prices fall.

Some examples include nitrogen fertilizer producers, such as CF Industries (CF), Rentech Nitrogen Partners (RNF) and chemical producers such as EMN, WLK, DOW, LYB, AXLL, DD, CCC, TG, CBT, CMT, ARSD, KOP.

Separately, when natural gas prices fall, the general view is negative for the coal space. Why? Electric utilities use, mainly, natural gas and thermal coal to produce electricity. So when one is rising against the other in price, electric utilities will buy more of the other, or at least try to with what's not hedged. When natural gas prices decline, it makes using thermal coal less attractive, which is negative for coal names BTU, ANR, ACI, CLD, JRCC, WLT, TCK, HW.

Who benefits when natural gas prices rise? Mostly producers that find and sell gas. A quick example is Chesapeake (CHK) and Apache (APA). Other nat gas producers includes (The top 40 U.S. natural gas producers- in order of largest to smallest in terms of production): XOM, CHK, APC, DVN, BP, ECA, COP, SWN, CVX, WMB, EOG, RDS-A, APA, Petrohawk Energy, OXY, QEP, EP, UPL, NFX, EQT, RRC, COG, XCO, NBL, MRO, XEC, PXD, PXP, FST, KWK, SM, EGN, SD, WTI, MDU, MMR, UNT, SGY, HES, ROSE.

Let's keep this small amount of color here as a premise for more color to come. The idea is, natural gas prices have been high and have doubled since a year ago. In recent action, natural gas futures fell back down below the $4.00/MMBtu level and have been in a downtrend since since April 19 when it was $4.44/MMBtu. Now, natural gas is 12% lower since then and is currently $3.91/MMBtu.

When you see this kind of move, you want to look at the related companies that use or sell natural gas since the move in natural gas creates trading opportunities.