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Want to Know Where Natural Gas Prices are Headed?

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Want to Know Where Natural Gas Prices are Headed?

Wednesday, 27 August 2008

By Charles Delvalle
One of the most volatile (and potentially profitable) commodities is natural gas. Sure, there is a lot of it out there, but it’s mostly waiting to be produced. That means any demand spike can quickly push up the price of natural gas. And what the Farmer’s Almanac says about this winter should perk up your ears.
The Almanac (which is right 80 percent of the time) predicts a cooler than average winter this year.

So far, it looks like that will be the case. According to the UK meteorological office, 2008 is 0.1 Celsius cooler than any year since 2000. The main reason is La Nina, a natural cycle that cools the globe.

What this means is that any commodity used to keep people warm (like natural gas or heating oil) should see heavy demand this winter. As people pay to keep warm, they’ll divert money away from non-essentials.

The best way to play this is to wait until fall and start buying up shares of Chesapeake Energy (CHK), which is a natural gas producer and explorer. As natural gas prices move higher, so should shares of Chesapeake Energy.

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