Deep Freeze!

| December 13, 2013 | 0 Comments

Cold temperaturesI don’t know how it is in your neck of the woods, but it’s downright chilly where I live.  My furnace has been running full blast for the past week thanks to the bitter cold snap covering most parts of the country.

Funny thing is, it’s not even officially winter yet!

According to some weather experts, these are the coldest early December temperatures the US has seen in decades.  It will be interesting to see what happens when the winter season officially arrives on December 21st.

But what I’m really watching is how this wintery blast is affecting commodities…

Two of this week’s top performing assets are rallying solely due to the cold weather.  Here’s a closer look at these top gainers for the week.

Natural Gas

No surprise here.  Natural gas turned in a monster week, gaining 6.2%.  As you may know, when heating demand swells, the price of natural gas tends to rally. 

This week’s EIA natural gas inventory report revealed a draw of 81 billion cubic feet (bcf) for the week of December 6th.  That’s a larger withdrawal than the 2 bcf reported last year and more than the five-year average draw of 64 bcf.

But here’s the deal…

Next week’s withdrawal will likely be enormous.  In fact, many analysts are suggesting it could eclipse last winter’s largest inventory drawdown of 201 bcf.  Such a large withdrawal this early in the heating season is very bullish for natural gas prices over the next four months.

I’ll go out on a limb and predict this commodity will rise to $5.00mmBtu this winter…

Orange Juice

Here’s another commodity booming due to cold weather… 

Orange juice turned in a weekly gain of 5.9% thanks to an unusual burst of sub-freezing California temperatures.  California orange industry experts say this is the earliest freeze event to hit the state in nearly 30 years.

It’s too early to know just how much damage was done to California orange crops, but investors are sending prices higher just in case.  In fact, the price of orange juice is closing in on 52-week highs at $1.50 a pound.

And remember…

The US orange crop is already taking a hit due to the citrus disease hitting Florida orange groves.  I wrote an article about the problems Florida is having here

Should the California freeze take another big bite out US production, we could see orange juice run to multi-year highs near $2.20 a pound.

Stay tuned to Commodity Trading Research for continued coverage of the natural resource markets!

Until Next Time,

Justin Bennett

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Category: Natural Gas, Orange Juice

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.