In recent weeks, CNBC's Jim Cramer has noticed a new group becoming "hated" on Wall Street: the natural gas cohort.
"Not long ago, everybody was touting this stuff as the cleaner, safer bridge fuel to a clean energy future," the "Mad Money" host said on Monday. "But lately, there's been a major backlash against nat gas from state and local regulators, ... and their negative attitude appears to have spread to investors."
And when he dug deeper, Cramer realized that the weakness went beyond natural gas as a commodity. Shares of natural gas producers, transporters, storage providers, exporters and even utilities that use natural gas to produce electricity have also fallen under pressure from sellers, he said.
"If you have any exposure to this stuff, you know what? That should scare you," Cramer warned. "Because if a brutal winter can't deliver a sustained natural gas rally, can anything?"
Unlike crude oil prices, which have continued their recovery after bottoming in early 2016, natural gas prices have stalled out, down over 15 percent in the last 12 months.
Cramer argued that this year's colder-than-expected winter should have reignited the natural gas group. But after surging in January, natural gas prices tanked, sinking nearly 30 percent from their late-January highs.
The "Mad Money" host pointed to state regulators as the first source of weakness. Since natural gas eclipsed coal to become the United States' leading energy source, state regulators have targeted the natural gas industry, blocking new plants and pushing renewable sources of energy.
California regulators have been particularly aggressive in phasing out gas-fueled facilities because of the state's goal to get 50 percent of its energy from renewables by 2030, Cramer said, referencing a recent Wall Street Journal report on the issue.
And while the issue hasn't yet come to a head in major natural-gas-producing states like Ohio and Pennsylvania, Cramer cited it as a worrisome trend.
"I think the newfound hatred for all fossil fuels is getting to be a real concern," he said. "It calls into question one of the most powerful components of the bull thesis, that natural gas was going to keep taking share within the power generation market."
"If that thesis changes to, 'Natural gas is going to stay at about a third of the power generation space and may even lose ground to renewables,' well, let me tell you it's going to be a lot harder to feel good about this group," he continued.
But glut or not, the Energy Information Administration expects U.S. production to rise to 81.7 billion cubic feet of natural gas per day in 2018 from 73.6 billion cubic feet per day in 2017.
"Put it all together and you can understand why whole swaths of this market have become uninvestable," Cramer said. "The natural gas producers are stuck in a house of pain — Chesapeake, Southwestern, Devon Energy, Range Resources, their stocks have been obliterated."
"Bottom line? I think the new hate on natural gas is here to stay," Cramer concluded. "Don't try to bet on this group. Don't speculate on it. It's just too risky in a world where everyone loves renewable energy and the younger generation absolutely despises fossil fuels, including the younger generation of portfolio managers. I know it's tough to take losses, ... but these stocks may not come back."