What happened
Shares of oil and gas pipeline operator Kinder Morgan (KMI +0.74%) fell sharply on Monday morning, down 5.5% as of 11:55 a.m. ET -- and it's no mystery why.
Worries over widening shutdowns and quarantines in China have investors fearing the whole global economy will get hit by a Chinese slowdown, decreasing demand for energy and sending oil prices plummeting today.
Image source: Getty Images.
So what
Indeed, according to the latest data from OilPrice.com, both WTI crude oil and Brent crude are now down about 6.5% on the day, and selling for under $100 a barrel -- their lowest prices in the past two weeks. (Brent actually costs only $95.50 a barrel right now).
Given the turmoil in the oil market, it kind of makes sense that an energy company like Kinder Morgan would be taking a hit right now, except for one thing: Kinder Morgan is much more of a natural gas stock than an oil stock. Indeed, KMI gets 70% of its revenues from transporting and storing natural gas, not oil! And while you might think that the price of natural gas would fall in tandem with the price of oil (they're both hydrocarbons, after all, and both used to generate power), in fact the price of natural gas is up 0.5% today.
Now what
Now consider that natural gas is in greater demand than oil as the cleaner burning fuel, and that natural gas is in especially high demand today as the U.S. attempts to liquefy and ship as much of it as humanly possible to Europe, to build up supplies there in case Russia closes its gas pipelines -- or in case Europe proceeds with halting gas purchases from Russia during the Ukraine conflict.
These are all strong reasons to conclude that what's bad news for oil demand globally isn't necessarily bad news for natural gas prices. These are all strong reasons not to follow the herd and sell Kinder Morgan stock today.
