In the last five trading days the shares of Liquefied Natural Gas Ltd (ASX: LNG) have outperformed the majority of the ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) Index members by some distance after rocketing higher by 21%.
Playing a key role in the rise of Liquefied Natural Gas's share price has of course been a jump in the natural gas price.
Prices have surged around 14% to US$3.057 per million British thermal units in the last two weeks thanks largely to analysts' belief that the natural gas glut in the United States is declining at a faster pace, after a hotter than average US summer according to the Financial Times.
Historically hot summers have caused strong demand for gas-fired power. Because of this experts are expecting it to have led to an easing of the glut leftover from last winter. In addition to this weather forecasts point to unseasonably warm weather throughout the whole of the United States well into next month.
Whilst this is undoubtedly great news for shareholders of Liquefied Natural Gas, they're not the only ones that will be smiling. Beach Energy Ltd (ASX: BPT), Oil Search Limited (ASX: OSH), and Santos Ltd (ASX: STO) all have exposure to natural gas as well.
Things are certainly looking a lot more positive for Liquefied Natural Gas. With natural gas prices at 16-month highs the company will be in a position to put a disappointing FY 2016 behind it.
But should you invest today? It's very difficult to say where natural gas prices will go from here. I feel they are likely to go higher, especially if the US experiences a warmer winter. If that is the case then Liquefied Natural Gas shares are likely to climb higher and retrace some of their sizable declines this year.
However an investment in this loss-making company would be a high risk one and not one that I would be willing to make.
