HOT SUMMER POINTS TO UPSIDE FOR NATURAL GAS

Investors may be inclined to take some profits and follow the near-term move lower in oil prices. But those trends also suggest valuations for Canadian energy stocks may dip to a more attractive level, an opportunity analysts at Raymond James thinks investors should jump on. “In the mid- to longer-term, we remain highly constructive on a meaningful recovery in oil prices, and we think that the natural gas macro may have the best upside in the near-term,” they told clients. The analysts noted that while summer driving demand is unlikely to provide much of an upside surprise for gasoline, natural gas demand is in a different spot. Warm temperatures continue to produce sharply higher air conditioning-driven power generation. The analysts pointed to forecasts that suggest the rest of summer will be warmer than usual, and we may see a so-called endless summer deep into September. “Strong seasonal natural gas demand, coupled with lower North American gas production and growing non-weather derived demand for natural gas, provides the building blocks for a natural gas scenario that can outperform oil.”