Sentiment is gathering on Wall Street over how to compensate for rising oil prices, which hit $105-per-barrel for West Texas Crude this week, after more saber rattling from Iran.

The Middle Eastern oil giant has slashed exports to France and Great Britain, and that has oil traders worried that higher oil prices will lead to high prices at the pump, where the average cost of a gallon of gasoline is nearing $4. Consumers won’t like that even a little bit, and any further volatility in the Middle East, just like in Egypt and Libya in 2011, could easily force oil prices even higher.

Antsy energy investors are already turning to alternatives like natural gas, where prices are low, and opportunity for stock growth is higher than in the crude oil sector.

Analysts are already tuned in, with more and more Wall Street firms lining up and singing the praises of natural gas stocks. Barclay Capital energy analyst Thomas Driscoll just slashed his price outlook for natural gas by 75 cents (to $3 per million British thermal units). Currently, natural gas prices are trading at approximately $2.61 per million British thermal units.

Driscoll says the slide in natural gas prices should hike demand, and benefit energy companies with full supplies of natural gas, even if prices decline any further. In that context, Driscoll likes Devon Energy, QEP Resources, and WPX Energy, which are currently trading below their actual values, he says.

In recent commentary to Barclay customers, Driscoll says to “buy DVN, QEP and WPX from among the gassy stocks”.

The U.S. government provides some context, noting last week that the nation’s natural gas supply, as measured by the U.S. Energy Department, was “lower than expected” as demand continues to be weak, largely due to an unseasonably warm winter across the U.S.

According to the Energy Department, underground natural gas stockpiles slid by 78 billion cubic feet during the first week of February, well below the guidance range of between 84-88 billion cubic feet, as established by analyst interviewed by Platts, an energy industry analytical firm. That’s the 11th consecutive week of lower stockpiles, Platts reports.

That slackening of inventory is due to a supply glut that has knocked natural gas prices for a loop over the last few months. Zacks Investment Research says falling prices are directly linked to the boom in North American shale oil and gas, which has apparently given the U.S. and global economies all the natural gas supply it needs – or wants.

“A supply glut has pressured natural gas prices during the past year or so, as production from dense rock formations (shale) – through novel techniques of horizontal drilling and hydraulic fracturing – remain robust, thereby overwhelming demand, says Zacks in an early February research note. “Natural gas prices have dropped more than 50% from 2011 peak of about $5.00 per million Btu (MMBtu) in June to the current level of around $2.40.”

“To make matters worse, mild winter weather across most of the country has curbed natural gas demand for heating, indicating a grossly oversupplied market that continues to pressure commodity prices in the backdrop of sustained strong production,” Zacks adds.

That scenario has big natural gas providers paring back inventories -- Zacks says that Chesapeake Energy cut reserves by 500 million cubic feet per day in term of output and could go as high as one billion cubic feet per day if natural gas prices don’t pop back up.

Analysts who study natural gas supply levels are advising investors to avoid “pure” natural gas plays and instead focus on companies with a reasonable balance of oil and gas production. Barclay’s Driscoll likes a couple of big names in that regard.

Says Driscoll, “On the large-cap side EOG Resources and Noble remain our top long-term, high-quality picks. EOG may have the best oil-shale portfolio in North America while Noble combines a strong exploration track record with strong North American shale assets."??He’s also bullish on Apache and Anadarko Petroleum, but says Encana and Ultra Petroleum are too expensive right now (the former is trading at $20 per-share, with a one-year average target estimate of $23 per share, while the latter is trading at $24 per share, but with a much higher target estimate of $35 per-share.)

Analysts at Zacks Equity Research says that natural gas stocks are actually trading at about 25% above their five-year averages and 26% higher than at the same period in 2011.

That means investors will have to get creative and really kick some tires to uncover natural gas that still have plenty of upside potential.

In Wall Street-speak, investors will need to find undervalued stocks where the goal is to buy low.

One candidate, Zacks says, is Chesapeake Energy, which is trading at about $24 per-share in mid-February. Analysts have pegged the company’s one-year price target at $29 per share, noting that the energy company has plenty of natural gas in reserves, and should see an uptick in share price when natural gas demand rises once again.

As long as oil prices remain high, businesses and consumers will continue looking for a low-cost alternative, and natural gas is a viable option Yes, demand may be soft right now, especially with a warm winter in our rear view mirror, and shale gas is making natural gas even cheaper and more abundant.

But sooner or later, that’s going to be a recipe for success – especially if crude oil sucks more cash out of the economy – and out of the stock market.