Hurricanes And Power Outages Unlikely To Stop Rising Natural Gas Prices

Johnson Rice analyst John Rowan doesn’t believe Hurricane Matthew will have any lasting impact on natural gas prices, which have been on fire since bottoming back in March. On Friday, Rowan told Benzinga that he’s as bullish as ever on gas prices in the wake of Matthew.

Rowan explained that there will likely be disruptions to natural gas-fired electricity in Florida, but the storm seems to be missing the bigger population centers. He pointed out that the chance that Matthew will circle back around on Florida now appears slim, and any natural gas disruptions in major cities will likely be transitory.

Once Matthew runs its course, natural gas investors will turn their attention back toward the coming winter. Last month, the National Oceanic and Atmospheric Administration (NOAA) called off its La Niña watch for the upcoming winter, suggesting that winter weather is becoming more difficult to predict.

Related Link: How Is Winter Shaping Up For Natural Gas Stocks?

Rowan believes conditions in the natural gas market will continue to be favorable in the near term. He suggested a combination of balanced supply and demand coupled with little U.S. drilling could drive natural gas prices above $5/ million Btu within a year. That potential move suggests significant upside from its current $3.18/million Btu price.

Once drilling recovers to normalized levels, Rowan sees gas prices back in the $3–4 range by the end of 2017.

In the past six months, the United States Natural Gas Fund, LP UNG is up 41.5 percent, the VelocityShares 3X Long Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess UGAZ is up 118.0 percent, and the VelocityShares 3X Inverse Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess DGAZ is down 79.7 percent.

Full ratings data available on Benzinga Pro.