Foreign media: Western natural gas companies are the beneficiaries of Middle East developments

How does Venture Global’s spot trading strategy bring stock price advantages?

According to Reuters, the situation between the U.S. and Iran has made Western natural gas suppliers and traders beneficiaries in the market. Investors expect that companies able to bypass the Middle East will reap substantial profits from high energy prices.

The report states that U.S. liquefied natural gas exporter Venture Global has performed particularly well. Since the outbreak of the conflict, its stock price has soared over 70%, far surpassing other global energy stocks, as the increase in natural gas prices has outpaced the rise in oil prices.

Jefferies analyst Mike Wilson stated, “The significant rise in natural gas prices is the most important signal for the market. This indicates that the fundamentals of the natural gas market are tighter than those of crude oil.”

The report mentions that although Europe imports relatively little natural gas directly from Qatar, the Strait of Hormuz has effectively been blocked, forcing Asian buyers to compete with Europe for U.S. liquefied natural gas, which in turn has driven up global natural gas prices.

Analysts note that U.S. liquefied natural gas export terminals are currently operating near full capacity. Therefore, to increase export volumes, it can only be achieved by reallocating existing cargoes rather than increasing production.

The report highlights that for stock investors, the focus is on which companies can cash in on this price shock.

Analysts believe that Venture Global has a unique competitive advantage: most of the products produced at its Plaquemines facility on the U.S. Gulf Coast are sold through spot trading rather than long-term contracts linked to U.S. natural gas prices. Currently, U.S. natural gas prices remain relatively stable.

Moreover, U.S. liquefied natural gas suppliers that rely more on contract pricing have seen smaller stock price increases but still outperform the broader energy index.

Will Riley, a portfolio manager at Guinness Global Energy Strategy, stated, “The clear beneficiaries in all this are the U.S. liquefied natural gas industry.”

On Monday, Morgan Stanley upgraded Venture Global and Chenier Energy from underweight to overweight, stating that supply disruptions in the Middle East have evolved into years-long supply losses, further tightening the market.

Investors also favor Western gas traders and suppliers targeting Europe.

Norwegian state oil (Equinor), oil and gas producer Aker BP, Var Energi, and Shell, the world’s largest liquefied natural gas trader, all continue to outperform the broader energy index by supplying gas to Europe through pipelines.

The report notes that after this round of price increases, liquefied natural gas stocks may face greater volatility. Nevertheless, even though many stocks are now above the target prices set by most investment banks, analysts remain optimistic.

The report mentions that damage to Qatar’s Ras Laffan energy facility will result in about 17% of the country’s capacity being unable to recover for up to five years, meaning that the market may take longer to return to pre-conflict levels.