Mother Nature Corrals Gas Bulls

| October 27, 2014 | 0 Comments

It’s tough being an energy bull right now.  Not only has the price of oil collapsed to multi-year lows at $80 a barrel, but now natural gas is losing ground as well. 

As you may remember, we’ve talked a lot about natural gas in recent weeks.  With the winter heating season right around the corner, the commodity should be ready for a seasonal run to higher prices. 

But Mother Nature is throwing a wrench in the works… 

The start to this year’s heating season, which begins November 1st, is looking downright bearish for natural gas.  Above average temperatures are set to consume large swaths of the US in coming days. 

Take a look…


As you can see in the NOAA’s 8-14 day outlook, the official start of the winter heating season will be unseasonably warm.  As a result, natural gas demand will stay under wraps at least through the first week of November. 

And that presents an issue… 

Weekly EIA natural gas storage inventory data is still coming in strong.  In fact, last week’s reading was a build of 94 bcf.   That’s well above the 5-year average build of 74 bcf, and last year’s build of 87 bcf.  

As long as above average temperatures stick around, inventory injections should stay abundant. 

What’s that mean for the price of natural gas? 

First of all, take a look at this chart… 

Natural Gas

As you can see, the commodity is breaking below its recent $3.75-$4.00 trading range.  With warm weather as far as the eye can see, natural gas will likely stay under bearish pressure until the $3.40 area, which is the low from November 2013. 

What should natural gas investors do now? 

If you’re willing to jump on a bearish natural gas ETF like the Proshares Ultra Short Bloomberg Natural Gas (KOLD), you may be able to profit from continued downside in natural gas. 

Remember, KOLD rises when the price of natural gas falls. 

But be careful… 

The first sign of cold US weather will turn this commodity to higher ground.  At that point, you can look to the US Natural Gas Fund (UNG) or the Proshares Ultra DJ-UBS Natural Gas (BOIL). 

Until Next Time, 

Justin Bennett

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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