Higher Natural Gas Prices Could Pump Up Oil Services Demand
Don't look now, but the prolonged cold snap in the U.S. has pushed natural gas prices toward multi-year highs above $4/btu. At the same time, most of the domestic oil services stocks have slumped to multi-month lows. The combination could present a buying opportunity for the domestic oil service firms of Baker Hughes (NYSE: BHI ) , Weatherford (NYSE: WFT ) , and C&J Energy Services (NYSE: CJES ) to name a few that are intriguing.
A major reason for recent weakness in the stocks has been less-than-robust capital expenditure plans by exploration firms to end the year. The general guidance for the fourth quarter wasn't overly robust, but the recent cold weather and reduction of natural gas inventories has pushed levels below prior years. The latest weekly report from EIA showed inventory levels 3% below the 5-year average levels. Also, the inventory number is already a substantial 7.2% below the levels of last year.
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Disclosure: Long CJES and WFT. Please review the disclaimer page for more details.