RECENT Energy and Power RESEARCH
Last week’s colder than normal weather provided support to natural gas prices and nat gas stocks.
Last week’s upward move in natural gas prices was a positive short term catalyst for domestic natural gas producers.
Last week, WTI prices slid downward which is a negative short-term catalyst for domestic oil and gas producers.
Rigs targeting natural gas rose by seven last week, an unusual data point as natural gas rigs have largely been decreasing in response to low natural gas prices since 3Q11. Continued increases in rigs drilling could further depress natural gas prices.
Last week, the count of oil rigs drilling decreased by eight. A continuation of this trend could signal that oil producers are feeling uneasy about the oil price or operating environment and want to cut back production.
Natural gas inventories declined more than expected, which is a positive indicator of either more than expected natural gas demand or less than expected natural gas supply.
Natural gas production has not slowed, despite persistently low natural gas prices.
Crude inventories increased less than expected last week, which was a positive indicator for oil prices and oil producers.
Last week the spread between West Texas Intermediate (WTI) and Midland crude narrowed, which was positive for producers based in the Permian Basin in West Texas where Midland crude is priced.
Continued warmer weather last week implies less natural gas demand and lower prices, weighing on natural gas producer stocks.
On February 12, the Energy Information Administration raised its outlook for oil prices which is a positive signal for oil producers.
Domestic oil prices (WTI) fell last week while international (Brent crude) oil prices rose resulting in a negative catalyst for domestic producers and a positive catalyst for international producers.
Oil rig counts were down slightly last week after last week’s strong increase. A continued drop of oil rigs would be a bearish signal from oil producers.
Natural gas rigs drilling dropped again last week, however, no real rebound in sight for natural gas prices.
Yields on high yield bonds moved higher last week. Continued moves upward in yields could mean that companies will have a higher cost of debt, which is most negative for companies that have significant near-term financing needs.
Natural gas spot prices closed at $3.27/MMBtu (millions of British thermal units) on 2/8/13, down $0.03 from the prior week.
Last week, the yield on the BofAML high yield bond index decreased, which is a positive sign for high yield companies with funding needs coming up.
US crude production continues to rise which could put supply pressure on crude oil prices.
Last week’s increase in coal prices relative to natural gas is a positive for coal-to-gas switching trends.
A larger than expected build in crude inventories caused oil prices to slide on the day, which is bearish for oil producer stocks.