U.S. natural gas futures have been declining for two months and are approaching lows of $2.2/MMBtu. This is due to rising production, reduced gas trade with offline LNG export facilities, and rising inventories. Gas production in the lower 48 states reached 102.4 bcfd in July, up from the low of 99.5 bcfd recorded in May.
Despite the record heat, inventories of Future Natural Gas - Ago 2024 (NGQ4) continue to be high, and storages are still full.
While the summer heat is forcing much of the United States to burn gas to cool homes and offices, Hurricane Beryl has put pressure on energy demand, causing blackouts for millions of residents.
As a result, demand for cooling systems decreased, causing a large surplus of gas remaining in storage.
One of the side effects of the hurricane was the closure of a major gas export facility, FREEPORT. This led to an oversupply in the gas market because it could not be transported to other areas.
The hope of the bullish is that there will be no other hurricanes to affect the demand for natural gas.
In the long run, there is a positive element to consider: more and more producers are closing their extraction wells because of low gas prices. This should, in theory, lead to a balance between supply and demand by 2025.
To get a comprehensive view of the gas market, we will analyze one of the largest producers of this fuel using INVESTING PRO, an intelligent financial advisor that provides us with essential data to make well-informed investment decisions. With this reliable source, we will be able to make smart choices.
EQT Corporation (NYSE:EQT is an integrated energy company operating in the Appalachian Mountains, providing natural gas through production and gathering, distribution and transmission, and energy conservation solutions primarily in the eastern and western coastal areas in the United States.
Source: InvestingPro
Calculating the 5-year DCF can be extremely beneficial, but it requires a series of complex calculations and the use of the correct data. Discounted Cash Flow (DCF) is a valuation method used to estimate the present value of a business based on forecasts of future cash flows. Simply put, it estimates how much cash the business will be able to generate in the future.
You can see from the pictures that the stock is currently undervalued according to the 5-year DCF calculations. This could be good news for investment in the natural gas business.
According to my forecast, gas prices will rise to about $3 in the next few months unless there are problems with production and destruction facilities.
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