Daily Brief - A Warm Winter's Tale

TLDR: US natural gas prices have plummeted to levels not seen in nearly three decades, diving deep into a near-record low as the country experiences what is likely its warmest winter on record.

Historically, when Toggle AI has observed such lows in natural gas prices, they have typically been followed by a rebound in prices over the next six months. However, this time, the path to recovery may not follow the historical script.

This dramatic drop has been fueled by a perfect storm: a significant decrease in demand for heating fuel, thanks to unusually mild weather, coupled with a surge in production hitting a record 105 billion cubic feet a day in December.

With heating demand plummeting due to the mildest winter months since records began in 1950, and production levels soaring, natural gas prices have freefallen.

As the market grapples with this oversupply, gas producers are signaling a cutback in production. Major players like Comstock Resources and EQT have already announced plans to reduce drilling and, potentially, production, highlighting a cautious approach to navigating the current price environment.

With storage levels swelling 11% higher than last year and global sluggish demand depressing prices further, the question looms: how will the natural gas market rebalance?

Market Movers: When Natural Gas prices fall?

Here are the best and worst performing energy stocks when natural gas prices have historically fallen 40% in 1 month:

The top 3 performing stocks:

1. BP (ticker: bp) with a 1-month return of 9.30%
2. Equinor (ticker: eqnr) with a 1-month return of 3.86%
3. Shell ADR (ticker: shel) with a 1-month return of 2.47%

The bottom 3 performing stocks:

1. ConocoPhillips (ticker: cop) with a 1-month return of -5.28%
2. Chevron (ticker: cvx) with a 1-month return of -2.97%
3. Devon Energy (ticker: dvn) with a 1-month return of -1.46%

Earnings Update: Suncor Energy reports tomorrow

Suncor Energy's performance in Q3 showed a decrease in profit compared to the previous year, attributed to the lower price of oil. Despite challenging market conditions, Suncor's total upstream production saw only a minor year-on-year decrease.

Looking into Q4 2023, expectations are set for revenue to fall by 8.73% compared to the equivalent quarter in the previous year, with earnings per share expected to contract by 40% to $0.81.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.

Asset Spotlight: Devon Energy's valuation at a low

In the 5 past occurrences when valuation indicators for Devon Energy were at a low, analysis from Toggle indicated a pattern of a median upward movement in the stock's price over the next 1 month.

However, it's important to note that DVN stock also typically exhibits negative seasonality over the next few months.