Energy markets are looking decidedly quirky today. In Wednesday trading, we saw the price of West Texas Intermediate crude oil rise 24.9%, and Brent crude go up 11.3%. However, prices of natural gas -- oil's lighter, cleaner, more environmentally correct cousin -- are heading in the other direction, down 3.7%.
Weirdly, the prices of Chart Industries (NASDAQ:GTLS), GasLog (NYSE:GLOG), and GasLog Partners (NYSE:GLOP), three companies tightly tied to the fortunes of the natural gas market, followed oil prices up today -- not gas prices down. By the closing bell, Chart stock ended up 8.5%, GasLog up 16%, and GasLog Partners up most of all -- 24.6%.
Here's the situation as I see it: Natural gas is becoming relatively cheaper to buy and use for heating and power generation, compared to oil. Assuming that consumers react rationally, this should increase demand for natural gas in settings where the two fuels can be used interchangeably.
It should also increase demand for storage of natural gas -- good news for Chart Industries, which gets 58% of its revenue and 60% of its gross profit from the distribution and storage of liquefied natural gas and other industrial gases. And it should increase demand for companies that transport natural gas to buyers overseas -- which is basically all that GasLog and GasLog Partners do.
The result: higher stock prices for Chart, GasLog, and GasLog Partners.
How long will this trend hold? That depends a lot on the oil market, which as you may have noticed has been a bit erratic of late -- but mostly to the downside, with WTI crude prices plunging 76% since their highs of early January. The longer oil prices stay low, the harder it's going to be for natural gas to compete with that.
Moreover, natural gas prices are only about 11% cheaper now than they were at the beginning of the year. They've been climbing lately, too, up 22% from early April, while crude oil prices are still generally falling. The longer these trends continue, the less of a price advantage natural gas will have over oil, and the more likely that today's gains in Chart, GasLog, and GasLog Partners stocks will turn out to be a blip -- and one quickly reversed.