Analysts at B. Riley FBR raise their 2019 natural gas price forecast to $3.50/Mcf, believing the nat gas market is at the cusp of entering a structurally undersupplied state beginning H2 2019, assuming normal winter weather.
The firm cites low current natural gas storage inventory, limited ability for power generation to switch from gas to coal and an unappreciated shift in composition of demand to highest-ever percentage of relatively price inelastic demand.
B. Riley FBR believes sustained price strength is necessary to incentivize enough incremental dry natural gas supply to balance the intermediate- to long-term market.
The analysts view Range Resources (RRC -1%) and Southwestern Energy (SWN +1%) as the best ways to invest in their thesis; for SWN, they maintain their $10 share price target while raising their RRC target to $29 from $22.
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