Extreme Heat Waves Set To Drive Up US Natural Gas Prices: 10 Energy Stocks To Watch This Summer

The U.S. faces severe heat waves, impacting areas from the Midwest into much of the Ohio Valley, Great Lakes, Northeast, and Mid-Atlantic through the next few days.

According to the latest updates from the National Oceanic and Atmospheric Administration (NOAA), high temperatures and warm overnight lows will likely challenge daily and even some monthly records.

Heat index readings are expected to peak from 100 to 105 degrees in many locations.

“Those without access to reliable air conditioning are urged to find a way to cool down. Record warm overnight temperatures will prevent natural cooling and allow the heat danger to build over time indoors without air conditioning,” the NOAA wrote.

Increased Demand and Rising Prices

During heat waves, electricity demand typically surges. People rely heavily on air conditioning to cool their homes and businesses.

This surge in electricity use typically drives up natural gas prices. For example, in June 2023, U.S. natural gas prices — as tracked by the US Natural Gas Fund LP UNG — climbed for four consecutive weeks due to elevated temperatures boosting electricity demand.

A similar trend is emerging this year. Henry Hub gas prices are poised for their third consecutive month of increases, fueled by higher-than-average temperatures in late spring.

Analyst Insights

As the summer of 2024 heats up, investors and analysts are closely watching the implications of soaring temperatures on natural gas prices and related stocks.

Eli Rubin, a senior analyst at EBW Analytics Group, told Natural Gas Intelligence that the market is poised to seize upon the heat theme throughout the summer.

“Chances for significantly hotter-than-normal weather during July and August could raise natural gas demand and drive prices higher,” Rubin stated.

Cooling degree days (CDD) are increasing. Forecasters use these to estimate the energy demand for air conditioning. DTN's 15-day forecast called for 57 CDD above the 30-year averages, with every single day exceeding peak summer CDD averages.

The combination of shrinking storage surpluses and scorching record heat could drive natural gas prices to exceed long-term fundamentals over the next 30-45 days. “Medium-term bullish upside is likely, but it is increasingly dependent on blistering weather forecasts coming to fruition,” Rubin added.

In major areas across the Midwest and Northeast, observers expect heat waves to span at least three days with temperatures of 90 degrees or higher. And tropical storm Alberto — the first tropical storm of the hurricane season — is currently aiming for Texas and Mexico, putting the Gulf Coast region on flood watch.

AccuWeather forecasts that these high temperatures will likely persist throughout the week, contributing to increased natural gas consumption. “The increased demand for cooling is going to be a problem here. This could have some impacts on the power grid,” AccuWeather meteorologist Bernie Rayno warned.

Heat Wave Hits US: 10 Stocks To Watch During June’s Sweltering Temperatures

10 Stocks To Watch

Here are some key stocks for investors to watch:

• EQT Corporation EQT: The largest producer of natural gas in the United States, focusing on the Appalachian Basin.
• Chesapeake Energy CHK: A leading producer of natural gas, oil, and natural gas liquids in the U.S.
• Cheniere Energy LNG: The top exporter of liquefied natural gas (LNG) in the U.S., operating the Sabine Pass and Corpus Christi LNG terminals.
• Canadian Natural Resources Ltd. CNQ: One of the largest independent producers of crude oil and natural gas in the world.
• Antero Resources AR A top producer of natural gas and natural gas liquids, primarily operating in the Appalachian Basin.
• EOG Resources Inc. EOG A producer of crude oil and natural gas, with operations across the U.S.
• Kinder Morgan Inc. KMI A major energy infrastructure company, operating one of the largest natural gas pipeline networks in North America. The company’s extensive midstream assets are critical for the transportation and storage of natural gas.
• Diamondback Energy Inc. FANG An independent oil and natural gas company with significant operations in the Permian Basin.
• ONEOK Inc. OKE A leading midstream service provider, focusing on natural gas gathering, processing, storage, and transportation.
• Vistra Corp. VST An integrated power company combining power generation, retail electricity, and natural gas-fired power plants.

Now Read: NOAA Meteorologists Predict Aggressive Hurricane Season: What It Means For Home Depot, Generac, Other Storm-Related Stocks

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