For investors looking to invest directly in natural gas, there are lots of ways to do so. There is the option to purchase a natural gas stock, the commodity itself or futures contracts. Some ETP’s that invest in natural gas futures can also be purchased by investors.
Natural gas prices experience volatility due to the cost of storage increasing and decreasing over the year. The demand for natural gas also changes seasonally. A lower demand for natural gas means that it spends more time in storage, so costs increase. This means that natural gas stock prices are also fluctuating over the year.
It is easier for some investors to focus on trading natural gas companies rather than the commodity itself. Companies that do not only work with natural gas have less exposure and lower volatility as the price of natural gas does not impact them so significantly.
The past few months have seen increased volatility in the price of natural gas. Natural gas prices have fluctuated between $3.00 per million British thermal units and just over $2.50. As of now, the price sits at $2.77 per MMVbtu.
Investing in natural gas stock means that you first need to look at companies that utilize natural gas as a main part of their business operations. Many companies that are successful at selling natural gas also work with oil and other commodities. These are our top natural gas stocks to invest in right now. These companies are do not deal only with natural gas.
Best Natural Gas Stock
These are companies that work in the natural gas market.
Antero Resources Corporation – (NYSE: AR)
Antero is an independent oil and natural gas company, exploring resources across the U.S, their operations are primed in the Appalachian Basin. Antero currently owns 292 miles of gas pipelines. The company is on our best natural gas stock list because they have increased efficiency significantly this year, with growth is production. As natural gas prices increase, Antero will benefit by experiencing higher profits.
Antero Resources stock price fell after a sell-off in February this year. The lowest the stock reached was around $17.02 per share, the stock then recovered and hit a 52-week high exceeding $22 in July 2018. The stock now sits close to $19 and is likely to increase even more in the near future.
Phillips 66 Common Stock – (NYSE: PSX)
Based in Texas, founded in 1875, this natural gas company has more experience in the market than most. Phillips 66 is one of the market leaders in the energy sector. Natural gas attributes to a large percentage to Phillips 66 business. PSX processes natural gas and markets natural gas liquids.
The February market correction knocked Phillips 66 stock price significantly, dropping from around $107 to $90. Since February this year, we have seen the stock price of Phillips 66 increase to healthy levels, now sitting at $113.60. With a market cap of $51.41 billion and dividend of $3.20 (2.88%) it’s clear to see that Phillips 66 is a natural gas mainstay and still has room to grow.
Phillips 66 is one of the top picks for current natural gas stock.
Natural Gas ETF’s
Some traders looking to invest in natural gas may opt for an ETF. Here are the top choices. In total, there are 7 natural gas ETF’s in the U.S.
United States Natural Gas Fund – (UNG)
This fund invests in front month futures contracts. Meaning that UNG will be impacted significantly to natural gas prices in the short term. Exposure in UNG is less than in a typical natural gas stock, as it is not a company but a fund.
United States 12 Month Natural Gas Fund – (NAGS)
This is another ETF, NAGS is popular amongst short-term traders. Although, it is also suitable for a long term position.
Natural Gas Future Prediction
It is predicted that natural gas reserves will have completely ran our by 2088. For obvious reasons this is not good for long-term investors as the future of natural gas is so speculative.
We are not in a bullish gas market, but that doesn’t mean there is no hope. As the economy grows, so will the natural gas price. When the global economy is showing growth, especially in commercial markets, demand for natural gas increases. Many industrial sectors rely on natural gas which prevents the price from falling dangerously low.
For example, pharmaceutical companies use natural gas like ethane to make a variety of health products. The farming industry uses natural gas as part of fertilizer.
This means that natural gas is here to stay for the foreseeable future, although a price is not so easy to determine.
Read: Top stock picks in the aerospace & defense industry.