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Why Investments in International Gas Companies May Prove Most Profitable

15 September 2022

While gas prices were poised to peak by 82% in October in line with the next energy price hike, the new Prime Minister Liz Truss has recently announced a new policy that will cap the amount that households are required to pay.

More specifically, the typical UK household will now pay no more the £2,500 a year for two years, equivalent to a relatively affordable amount of £208.33 a month.

However, this doesn’t mean that gas companies or stocks are no longer attractive to investors, especially in the near term. But why else is now a good time to invest in natural gas stocks in particular?

What are the Causes of Global Gas Price Hikes?

In August, it was revealed that European gas prices had risen to about 10-times higher than their average over the previous decade.

This trend was even more prevalent and pronounced in the UK, with the cost of UK gas peaking at an incredible 537p per therm (a measurement of gas consumption) last month. In February, it has been just 38p per therm, highlighting exponential price growth within an incredibly short period.

But what’s behind this price hike? Well, prices had already begun to rise towards the end of 2021, as the final global coronavirus lockdowns were lifted and economies began to return to normal. This saw the energy demand soar globally, with an unchanged level of supply causing prices to rise exponentially.

This issue was exacerbated further in February when Russia invaded Ukraine and triggered a conflict that reduced the supply and flow of oil and natural gas into Europe. With a far greater imbalance between supply and demand, wholesale prices have risen at an even sharper rate and this burden has largely been passed to end users.

At the same time, European governments have looked to sanction Russia in part by reducing their energy imports from the region. This caused the price of alternative and natural gas sources to increase as a result, while this trend shows no sign of abating anytime soon.

Why Now is a Good Time to Invest in Natural Gas

Natural gas has certainly seen a huge spike in demand of late, largely because it isn’t dependent on oil and can be sourced from a broader range of locations globally.

As a result, now may be the ideal time to invest in natural gas stocks, which offer potential value both as a speculative asset and one that’s likely to appreciate consistently over the next 20 years or more.

In terms of the former, CFDs offer an excellent way of trading natural gas and the market’s fluctuating prices. This is because they’re largely speculative and enable you to profit without assuming ownership of the underlying asset or financial instrument.

This way, you can also trade associated indexes and CFDs through the NASDAQ, which may help to minimise your exposure to risk over time.

However, if you prefer buy-and-hold investment strategies that afford you a secure store of wealth, natural gas also provides a viable option.

More specifically, the International Energy Agency has forecast that natural gas demand will rise by a further 31% through 2040, outperforming the expected 21% increase in oil demand. So, you can invest in targeted stocks and hold them as they appreciate, while planning a viable exit from the trade at some point in the future.

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