March 17 (Bloomberg) -- EnCana Corp. overtook Royal Bank of Canada to become the country's biggest company by market value for the first time in more than two years as Canada's largest natural-gas producer gained on higher fuel prices.

Calgary-based EnCana's market value was C$56.9 billion ($57 billion) at 1:19 p.m. trading on the Toronto Stock Exchange. That tops Royal Bank, the country's biggest lender, at C$56.4 billion.

``Gas is the most under-valued commodity right now,'' said Glenn MacNeill, vice president of Sentry Select Capital Corp. in Toronto, who manages the equivalent of about $752 million including 183,000 EnCana shares. ``People realized it was selling at half the price of oil and was too cheap.''

U.S. demand for gas, the least polluting fossil fuel, is rising while exports from Canada fall and higher prices in Europe and Japan contribute to a decline of imports in a liquefied form, he said.

``Gas will be relatively strong this summer,'' MacNeill said in a telephone interview. Gas futures on the New York Mercantile Exchange on March 7 reached $10 per million British thermal units for the first time since January 2006.

Canadian gas exports, which accounted for 83 percent of U.S. imports of the fuel, averaged about 10.1 billion cubic feet last year, according to Energy Department data. Lower production and increased demand from oil-sands plants may pare sales to American consumers by about 1 billion cubic feet a day this year from in 2007, John Gerdes, an analyst with SunTrust Robinson Humphrey in Houston, said today in a research note.

Doubling Production

EnCana's daily gas production last year was 3.57 billion cubic feet of gas, up 5.9 percent from 2006 and about double the company's forecast, EnCana said in Feb. 14 statement. Output of the fuel, which accounts for about 82 percent of EnCana's total production, will climb this year to about 3.8 billion cubic feet a day, the company has said.

In September 2005, after Hurricanes Katrina and Rita roiled gas markets, EnCana became the first energy producer in at least 18 years be ranked as Canada's most valuable company.

Including dividends, EnCana gained about 13 percent this year while Standard & Poor's/TSX Composite Index, the broadest index in Toronto, declined 1.2 percent. Toronto-based Royal Bank has declined 14 percent.

EnCana shares fell C$2.66, or 3.4 percent, to C$75.84 today in Toronto. Royal Bank fell C$1.83 TO $43.69.

Shares of Royal Bank and other Canadian lenders dropped on concern mortgage losses will mount after U.S. investment bank Bear Stearns Cos. was sold for a 10th of its market value to avoid collapse.

``Financial companies are going through a very rough time,'' Sentry's MacNeill said. ``Liquidity and credibility are critical for financial institutions, and we're just losing a lot of that right at the moment.''

Exxon Mobil Corp., based in Irving, Texas, is the biggest company in the world by sales, has a market value of about $449.1 billion.

To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

Last Updated: March 17, 2008 13:22 EDT