The weather heading into the Christmas holiday was "much warmer" than it was last year and "slightly warmer" than the five-year average, analysts at Credit Suisse said in a research report.
The Analysts
Credit Suisse's William Featherston, Betty Jiang, William Janela and three others.
The Thesis
The U.S. Energy Information Administration is expected to report a 110-to-120-Bcf withdrawal for the week ending Dec. 22, according to Credit Suisse. This reading would fall notably short of the 237-Bcf withdrawal for the same week one year ago, but in-line with the five-year average of a 107-Bcf withdrawal. As a whole, natural gas inventories fell to 3,329 Bcf, which would narrow the deficit versus last year to 31 Bcf and pushes up the surplus versus the five-year average to 147 Bcf.
Over the past month, the weather-adjusted S/D has been oversupplied by around 1.3 Bcfd versus last year but around 1 Bcfd undersupplied versus the five-year average, the report said. The storage withdrawal season will likely end with inventories exiting the winter at around 1.5 Tcf, the analysts said.
"This implies valuations are modestly attractive vs. the long-dated (2021) futures curve of $2.83/MMBtu and our normalized forecast of $3/MMBtu," according to Credit Suisse.
The analyst's top E&P picks are:
- Marathon Oil Corporation MRO
- Continental Resources, Inc. CLR
- Anadarko Petroleum Corporation APC
- Cimarex Energy Co XEC
- Extraction Oil & Gas Inc XOG
Credit Suisse's top picks in gas are:
- EQT Corporation EQT
- Range Resources Corp. RRC
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