Elias Stein
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Two commodities that power the world are taking divergent paths, and it could have a big impact on consumers in the coming months.
Crude oil is down some 25% from its highs, but natural-gas prices are still soaring. Natural-gas futures rose to new 14-year highs this past week, hitting $9.33 per million British thermal units on Tuesday. Natural gas is the largest source of electricity in the U.S. and a major source of heating around the world.
There are several reasons for the differing fortunes of oil and gas, but at a basic level it has to do with how the world has adapted to Russia’s invasion of Ukraine and the resulting sanctions. While Russia has continued to export oil to various buyers, including India and China, it has been reducing the amount of natural gas it sends to Europe. That has added to a global natural-gas shortage.
Natural-gas futures in Europe are more than 10 times as high as they were a year ago. That will soon start showing up in heating and electricity bills. In Germany and England, wholesale power prices hit new records this past week after having more than quintupled in the past year. In the U.S., power prices are considerably lower than they are in Europe, because of large domestic supplies of natural gas, but they’re still rising.
| Company / Ticker | Recent Price | YTD Change |
|---|---|---|
| EQT / EQT | $47.11 | 116% |
| Range Resources / RRC | 33.38 | 87 |
| Southwestern Energy / SWN | 7.41 | 59 |
| Coterra Energy / CTRA | 29.35 | 54 |
| Company / Ticker | Recent Price | YTD Change |
|---|---|---|
| Golar LNG / GLNG | $28.58 | 131% |
| Cheniere Energy / LNG | 161.48 | 59 |
| EOG Resources / EOG | 113.69 | 28 |
| Shell / SHEL | 52.91 | 22 |
Note: data through Aug. 17
Source: Bloomberg
Investors can play the increase in natural-gas prices by buying gas producers like
EQT
,
Southwestern Energy
,
and
Range Resources
,
or companies with exposure to liquefied natural gas such as
Shell
,
and
Next Week
Monday 8/22
Palo Alto Networks and Zoom Video Communications report quarterly results.
The Federal Reserve Bank of Chicago releases its National Activity Index for July. Consensus estimate is for a negative 0.14 reading, slightly better than in June.
Tuesday 8/23
Nvidia
reports second-quarter fiscal-2023 results. In early August, the company preannounced weaker-than-expected sales for the quarter on softness in its gaming segment. Shares are down 6% since then.
Intuit
,
Macy’s
,
Nordstrom
,
and
Toll Brothers
release earnings.
The Census Bureau reports new residential sales data for July. Economists forecast that sales of new single-family homes were at a seasonally adjusted rate of 577,500, 12,500 less than in June. New-home sales are down more than 40% from the summer of 2020.
S&P Global releases both its Manufacturing and Services Purchasing Managers’ indexes for August. Expectations are for the Manufacturing
PMI
to be 52, while the Services PMI is seen coming in at 50. This compares with readings of 52.2 and 47.3, respectively, in July. That was the first reading below 50 for the Services PMI in more than two years, indicating contraction in that sector.
Wednesday 8/24
Autodesk
,
NetApp
,
Salesforce
,
Snowflake, and Williams-Sonoma report earnings.
The Census Bureau releases the durable-goods report for July. The consensus call is for new orders for durable manufactured goods to increase 0.5% month over month to $274 billion.
Thursday 8/25
Canadian Imperial Bank of Commerce
,
Dell Technologies,
VMware
,
and Workday hold conference calls to discuss quarterly results.
The Federal Reserve Bank of Kansas City hosts the three-day 2022 Economic Policy Symposium in Jackson Hole, Wyo. “Reassessing Constraints on the Economy and Policy” is the theme for this year’s confab.
The Bureau of Economic Analysis reports its second estimate of gross-domestic-product growth. The preliminary estimate was that GDP contracted at a seasonally adjusted annual rate of 0.9% in the second quarter. This marked two consecutive quarters of declines, meeting one definition of a recession.
Friday 8/26
The BEA reports personal income and spending for July. Income is expected to increase 0.6% month over month, matching June’s gain. Spending is seen rising 0.5%, compared with 1.1% previously. Consensus estimate is for the core personal-consumption expenditures price index to surge 4.7% year over year, after a 4.8% jump in June.
Write to Avi Salzman at avi.salzman@barrons.com
