Energy Stocks Soar Amid Surging Raw Material Prices

European Natural Gas Supply Shortage... Crude Oil Prices Hit Highest Since Late 2018
Daesung Energy and GS E Record Intraday Highs on 29th
Energy Chemical Sector Rises 11% in One Month

On the 28th, as domestic gasoline prices steadily rose, maintaining the highest level in three years at the 1,600 won range, fuel price information was displayed at a gas station in Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Ji Yeon-jin] Energy-related stocks are surging as raw material prices such as natural gas and oil skyrocket. Although energy demand is increasing due to the reopening of economic activities worldwide, production has decreased during the transition to eco-friendly energy, fueling so-called 'green inflation.' This has raised expectations that rising prices will lead to improved earnings for energy companies.

According to the Korea Exchange on the 29th, Daesung Energy, a Daegu-based city gas company, recorded an intraday high of 12,800 KRW, up 20.19% from the previous day, setting a new 52-week high. The day before, GSE, a city gas supplier in the western Gyeongnam region, surged more than 25% from the start of trading on the KOSDAQ market, reaching a record high of 3,495 KRW. Both stocks closed at their daily limit up the previous day as well.

Over the past month, the energy chemical sector has been the best-performing sector in the domestic stock market. The 'KRX Energy Chemical' index jumped 11.18%, and the KOSPI 200 Energy Chemical index also rose 9.76%. This is an outstanding return compared to the KOSPI, which fell 0.98%, and the KOSPI 200, which dropped 1.02% during the same period.

Among individual stocks, SK Gas surged 41.70% over the past month, and Korea Gas Corporation also rose 32.64% during this period. S-Oil and GS increased by 26.10% and 10.11%, respectively. The record-breaking surge in natural gas prices in Europe is analyzed to have significantly boosted the corporate value of these companies. When energy raw material prices rise, these companies are expected to improve earnings through price increases in their products and services.

According to the financial investment industry, European natural gas prices reached $24.6 per MMBtu (million British thermal units) in September. This is $19.4 higher than the U.S. price of $5.2/MMBtu, which itself has more than doubled since the beginning of the year. As of the 28th (local time), Dubai crude oil rose 1.54% from the previous day to $77.34 per barrel, marking the highest level since October 2018. Researcher Jo Yoon-soo of Yuanta Securities said, "Due to the eco-friendly policy trend, energy companies are expected to be conservative about expanding production in the future, and the decline in crude oil production in the Gulf of Mexico is also influencing the strong oil prices," adding, "Improved earnings are expected from price increases in products and services in the energy equipment and service sectors."