From Natural Gas to Solar Power... Energy Stocks Stirred by Oil Price Surge Ripple Effect

▲ Facilities of the Nord Stream 2 gas pipeline project halted due to the Ukraine crisis [Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The rise in oil prices triggered by the Ukraine crisis is spreading to natural gas and solar power, causing energy-related stocks to stir. Typically, rising energy prices lead to inflationary pressures by pushing up overall prices, which is considered a negative factor for the economy. However, investors are turning this into an opportunity by investing in commodities and related stocks.

According to the New York Mercantile Exchange (NYMEX) on the 1st (local time on the 31st), natural gas futures prices recorded $8.73 per MMBTU (million metric British thermal unit). Natural gas futures prices hit a 10-year high of $8.99 on the 25th. Over the past year, natural gas prices have more than tripled, and especially this month alone, they have surged over 20%, showing a steep upward trend.

Europe depends on Russia for 41% of its natural gas, and while it is continuing sanctions against Russia and seeking to diversify import sources, the high dependency makes it difficult to diversify imports overnight. Moreover, with the peak cooling season in the third quarter and the possibility of natural gas shortages in winter increasing, prices are soaring.

Accordingly, domestic natural gas-related stocks are also on the rise. SK Gas, Korea Gas Corporation, Daesung Industrial, and SH Energy & Chemical are representative examples. These stocks have been steadily climbing since the end of January, and especially during issues such as the full-scale war between Russia and Ukraine, they surged close to the upper price limit.

Natural gas ETNs are also soaring. The returns of natural gas futures ETNs issued by domestic securities firms, such as Shinhan Leverage Natural Gas Futures ETN, KB Natural Gas Futures ETN, Samsung Leverage Natural Gas Futures ETN B, and Daishin Natural Gas Futures ETN, have all exceeded 50%. It is understood that the leverage natural gas ETN products have yielded over 300% returns just this year.

With heightened awareness of energy security in Europe due to the Ukraine-Russia war, interest in eco-friendly energy sources like solar power is also increasing.

According to the Korea Exchange, Hanwha Solutions closed at 39,050 KRW, up 6.11% from the previous trading day. During the session, Hanwha Solutions rose to a high of 39,600 KRW before giving up some gains. This marks about a 30% increase from the low on April 28 and represents a four-day consecutive rise. OCI, one of the representative solar power stocks, is also on a continuous rise. OCI closed at 129,000 KRW, up 0.39% from the previous day, and during the session, it surged to 136,000 KRW. OCI has also risen for five consecutive trading days, jumping nearly 37% from the low on April 28.

Domestic listed solar power ETFs have also recorded over 20% gains in the past month. The ‘SOL China Solar CSI’ ETF has risen about 27% since the 27th of last month and over 10% just this month.

The solar power boom from Europe has lifted the stock prices of solar power companies, which had long struggled. The EU announced it will invest 210 billion euros in renewable energy transition by 2027. In particular, it is accelerating the transition to eco-friendly energy sources centered on solar power by more than doubling power generation capacity by 2025. The U.S. Department of Commerce invited solar companies such as Hanwha Solutions and OCI to a business roundtable held during President Joe Biden’s visit to Korea on the 21st of last month, strengthening the ‘Korea-U.S. solar alliance,’ which is also positive for stock prices.

Lee Jin-ho, a researcher at Mirae Asset Securities, said, "Europe’s de-Russia policy could accelerate the growth of the solar power market," adding, "Given the necessity to address climate change issues and accelerate the transition to renewable energy, the growth rate of solar power is expected to speed up."

Lee Min-jae, a researcher at NH Investment & Securities, analyzed, "Due to Russia’s demand for ruble payments and supply-demand imbalances in the LNG market, the strong natural gas prices are expected to continue," and "the value of companies like Korea Gas Corporation is expected to rise accordingly."