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Brrr, it’s cold outside!

Other than the West Coast, most of North America has suffered from a colder and snowier late winter and early spring season this year. On Wednesday, it snowed again in Denver.

Not surprising, natural gas inventories in the U.S. are significantly below average due to a greater-than-average demand for heating.

The Globe and Mail

Lower-than-average inventories come at a time when seasonal influences for natural gas prices are favourable until mid-June. Natural gas prices are driven at this time of year by inventory levels and temperatures that are above or below average.

According to U.S. weather forecasters, weather is expected to change dramatically from cooler and wetter than average this spring to hotter and wetter than average from mid-May to the end of July this year. That means more natural gas will be needed to produce more than average power used for air conditioning. The stage is set for at least a short-term upside move in natural gas prices during their spring period of seasonal strength.

The Globe and Mail

On the charts, U.S. natural gas prices recorded a technical bump on Wednesday. “Natty” bounced from near long-term support at US$2.40 per per million British thermal units (MBtu), moved above its 20-day moving average and recorded upward swings by daily MACD, Stochastics and RSI.

In Canada, Alberta natural gas (AECO) prices popped during the past week from $1.50 to $2.50 per MBtu.

The Globe and Mail

The Globe and Mail

The stage is set for a trading opportunity in natural gas prices between now and at least mid-June.

A preferred vehicle for retail investors looking for a liquid investment is through the exchange traded note with the symbol UNG on U.S. exchanges. It actually is an exchange traded fund designed to track in percentage terms the price of natural gas.

A Canadian exchange-traded security also exists: Horizons Natural Gas ETF (HUN-T). However, units are thinly traded.

Horizons also has a double leveraged natural gas ETF that is actively traded: HNU. However, price volatility in these units is off the charts, and the ETF is not for the faint of heart. Not recommended.

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