Among the equities seeing immense interest of late are natural gas stocks. Companies such as Cabot (NYSE:CBT), Chesapeake Energy (NASDAQ:CHK), Cheniere Energy (NYSEMKT:LNG) and Tellurian (NYSEMKT:TELL) are seeing mixed price action today.
Throughout the day, these stocks have surged and plunged as investors attempt to discern where natural gas prices are headed. Of course, in this uncertain time, energy prices have become a key point for investors to watch.
Why? The Russian invasion of Ukraine has put strong upward pressure on the prices of many commodities. From wheat to lithium to nickel and energy sources such as crude oil and natural gas, commodity prices are skyrocketing. That’s because Russia and Ukraine happen to be major producers of these key commodities. Conflict and resulting sanctions have made it nearly impossible for a disrupted supply to keep up with global demand.
Thus, until the invasion ends, we’re likely to continue to see commodity price volatility. Today, the price of many key commodities such as crude oil and natural gas did dip. Natural gas took a much smaller hit to crude, which has begun to sell off from its peak.
That said, let’s dive into what is likely to drive these natural gas stocks over the medium term.
What’s Going on With Natural Gas Stocks?
Today’s choppy price action with natural gas stocks certainly makes sense. On the one hand, natural gas prices are down. On the other hand, prices are still near all-time highs. There remains a significant number of investors who believe this may not be even close to the top of this bull market in natural gas.
That’s because it’s widely expected that many countries may continue to wean off of Russian natural gas. Europe currently gets approximately 40% of its natural gas from Russia.
Europe has made a number of moves recently to reduce its reliance on Russian natural gas. While these maneuvers may take years to play out, it’s clear that where energy supply is located matters more than ever. For these natural gas stocks, that means geographical exposure is very important. Right now, natural gas prices in Europe have spiked to all-time highs.
As we head into the spring and summer months, these global energy issues may abate somewhat. However, over the medium and longer term, it’s unclear what the level of average disruption will be to energy markets. Accordingly, investors appear to be bracing for higher natural gas prices, with these four stocks on the watch lists of many right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
