Thursday, May 07, 2009

Natural Gas: Off the Canvas

Materials and Energy are having another great day. Natural Gas has finally gotten up off its back in the last few days. The price of natural gas is up nearly 5% today to $3.72. This has been reflected in the ETF covering the space (UNG), which is up an equal amount.

It's in the underlying stocks that we see the biggest moves. Anadarko (APC) is also up 5%. Corporate Governance-challenged Chesapeake Energy (CHK) is up 7% today.

My favorite in the NatGas space is McMoRan Exploration (MMR), a smaller player in the Gulf. It's up 18% today. I discussed it a few weeks ago ahead of earnings. They disappointed, but the stock price has steadily risen since then. It still trades far below levels seen last year. After today's run, it's back at its early February 2009 levels.

Jim recently worried about how the current price of NatGas could negatively affect firms' operating results (especially smaller players) as the year rolled on, as they haven't prepared for the price of natural gas at these levels.

That risk is still there. However, the other side is that today is the first real evidence of an upswing in this commodity compared to others. We're also heading back in to hurricane season next month, which should support the price further. There should still be some price appreciation in this space in the weeks to come.

Position: None.

Originally published in on 5/4/2009 3:18 PM EDT

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