Did You Profit From The “Polar Vortex”?

| January 8, 2014 | 0 Comments

cold weatherBaby, it’s cold outside…

Check that. 

It’s downright frigid!

As you may know, parts of the US are experiencing a brutal cold snap.  In fact, Americans in 24 states are getting some of the coldest temperatures they’ve seen in nearly 20 years!  It’s so cold, the wintery front has its own technical term… the “Polar Vortex”.

Flights are cancelled, schools are closed, and businesses are shuttered in the Midwest, East, and Southern US.  Clearly, brutal cold brings a lot of misery along with it.

That is, unless you’re a bullish natural gas investor…

As loyal readers know, I suggested a long position in the US Natural Gas Fund (UNG) here.  I suspected the early November low of $3.40 mmBtu was a seasonal low for natural gas.  And thanks to the recent, massive rise in the gassy commodity, savvy investors are sitting on some impressive gains in UNG. 

In fact, the commodity ETF is up a whopping 21% since my bullish call.  In the world of commodities, that’s a spectacular short-term gain!

So, what exactly is pushing the price of natural gas higher?

If you’re new to the world of commodity investing, you may not realize that trading in natural gas largely depends on variations in US temperatures.   

In a nutshell, when it gets overly hot in the summer, demand for the commodity can rise beyond normal seasonal tendencies.  As a result, the price of gas usually rises to account for the extra demand.

And the same thing happens when it gets abnormally cold- like it is right now.

As consumers crank up the heat to keep their homes warm, natural gas demand surges. 

Jumps in consumption are reflected in weekly US Energy Information Administration (EIA) natural gas inventory reports, which come out every Thursday.

When gas storage levels decline (or are expected to decline) beyond average seasonal norms (as they are now), the market reacts by pushing prices higher.

So what’s in store for natural gas as this bitterly cold winter develops?

Next week’s EIA inventory report will likely show another massive natural gas storage withdrawal.   However, with the commodity trading near multi-year highs at $4.50 mmBtu, investors are taking a wait and see approach before committing to new positions.

What’s more, the bitter cold is expected to give way to above average temperatures by early next week.

That means anyone sitting long UNG may want to consider taking a profit!

Folks, stick with Commodity Trading Research

If you’d like to discover what makes the commodity markets tick, there’s no better place to be. 

And the best part is…

I’m always on the lookout for profit opportunities in commodity-based ETFs.  As holders on UNG can attest, ETFs are a great way to capitalize on price swings in various tangible assets- without the risk of futures contracts!

Until Next Time,

Justin Bennett

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Category: Natural Gas

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.