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Gas Could Heat Up Energy Stocks By Spencer Jakab

U.S. stocks appear poised for gains after a big rally in bonds yesterday. Economic data was weak enough to raise bets on Fed rate cuts later this year but not so bad as to spoil the mood outright. Lower yields also soothed worries about the larger deficits President Trump's "One Big Beautiful Bill" could spur.

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Some like it hot-energy investors, for example.

A basket of U.S. oil-and-gas producers has trailed the S&P 500 by 9.4 percentage points year-to-date, dashing stock-market optimism following November's election. But a balmy summer could help.

U.S. benchmark crude prices are down by more than a fifth since briefly topping $80 a barrel shortly before Inauguration Day. While oil got most of the attention , natural gas looked like a potential saving grace for the industry. A cold winter, booming exports of liquefied-natural gas and strong power-generation demand sent domestic prices of the fuel to their highest in more than two-years in mid-March.

That fell apart quickly. Mild spring weather and maintenance at some LNG export facilities sapped demand. Gas in underground storage was more than a fifth below year-ago levels two months ago. This meant producers would have had to divert much more production to refill it ahead of the heating season.

But this morning's Energy Information Administration report on storage is expected to show the deficit has been cut by more than half.

Several factors could propel prices back to a fresh multiyear high. One is the weather as air-conditioning demand forces gas-fired electricity generators to pick up more of the slack.

The National Oceanic and Atmospheric Administration recently gave decent odds of above-average temperatures in much of the country this summer. The Federal Energy Regulatory Commission said that, if NOAA's assessment is right, "the electric grid will likely be challenged throughout the continental United States."

Booming net exports of gas are the main demand driver, though. The EIA forecasts a 26% rise compared with last summer. Ironically, lower oil prices make the gas picture more bullish.

Drilling rigs have been idled in America's shale patch since some wells are around breakeven price levels. But a drop in oil-drilling activity means those fields will produce less associated gas.

Analysts at Morgan Stanley estimate that a $10-a-barrel decline in crude prices-about the drop year-to-date-would shave 0.9 billion cubic feet a day in gas supply. For perspective, last summer saw underground storage grow by less than 5 bcf a day, so the shortfall could be material.

A wild card is rapidly growing power demand from data centers. In January, analysts at Bernstein Research laid out the scenario for a natural gas "super cycle" as AI and LNG export growth coincide with supply constraints. This could push natural gas prices to $5 per million British thermal units this year and next. Futures prices peaked around $4.50/MMBtu in March and settled at $3.72 Wednesday.

Even briefly topping $5-a level not seen since 2022 when Russia's invasion of Ukraine jolted the market-would be a shot in the arm for more gas-exposed U.S. energy producers such as EQT , Expand Energy , Coterra Energy and Antero Resources .

Stocks I'm Watching

MongoDB : The software company raised its annual guidance after posting better-than-expected quarterly results. Shares jumped 16% in premarket trading.

Procter & Gamble : The Tide is going out. P&G said it would cut 7,000 jobs , or roughly 15% of its nonmanufacturing workforce, over the next two years.

Kimberly-Clark : The consumer-goods company is nearing a sale of its Kleenex and tissue businesses outside of North America for around $3.5 billion, part of an attempt to focus on more profitable areas, The Wall Street Journal reported .

Boeing : The plane maker will pay $1.1 billion to avoid prosecution for two crashes of its 737 MAX jets.

Broadcom : The chip maker and Nvidia rival is due to post quarterly results late Thursday. Shares have risen eight of the past nine days, and closed at a record high Wednesday.

Five Below : More like "Five Above." The discount retailer posted better-than-expected quarterly results . Shares rose 5% premarket. Peers Dollar General and Dollar Tree said this week that an influx of middle- and upper-income customers was boosting sales. ( Recap with our podcast .)

PVH : The Calvin Klein and Tommy Hilfiger parent cut its annual profit outlook, citing the impact of tariffs on shipments heading into the U.S. Shares dropped more than 8% ahead of the open.

Wise : The money-transfer company said it would shift its main listing to the U.S., the biggest market for products. Shares rose 10% in London.

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About Me

My name is Spencer Jakab and I've been musing about money and markets for more than 30 years, including editing The Wall Street Journal's Heard on the Street column for a decade, writing two investing books and running a team of stock analysts at a global investment bank.

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June 05, 2025 06:47 ET (10:47 GMT)

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