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Summary Oil weighed on pipeline stocks even though natural gas, which is more important to cash flows, was sharply higher. The spike in natural gas highlights wide regional price disparities and the ongoing need for additional infrastructure. This was reflected by Williams Companies, which moves with crude even though they mostly handle natural gas. If pipeline stocks moved with natural gas rather than crude oil, their long-suffering investors could look back on a good week. On Tuesday, crude was down $5 per barrel for the week, before recovering $2 by Friday. It’s tumbled $20 since early October, bringing Brent Jan, ’19 to $66. By contrast, the Jan. ’19 natural gas contract stormed out of its $2.90 to $3.50 per Thousand Cubic Feet (MCF) range that has constrained it all year, almost reaching $5 on Wednesday. Rarely have oil and gas been so disconnected. The energy sector moves to the rhythm of crude. It’s is a global commodity, relatively easy to transport, which allows regional price discrepancies to be arbitraged away. Oil can move by ship, pipeline, rail or truck. Transportation costs vary from a few dollars per barrel for pipeline tariffs or waterborne vessel to $20 or more by […]
