Can Heat Wave Turn Around Natural Gas ETF?
Zacks Investment Research | Aug 14, 2014 10:47AM ET
Natural Gas prices have been pretty bouncy this year having started the winter with a bang but seeing a losing streak in summer. First, a cold snap in the U.S., then tensions in oil-rich Russia and finally Sunni Islamic militants’ attack in Iraq pushed up energy prices. However, milder temperatures lately have caused prices to fall sharply.
A mild summer actually restrained Americans from indulging in air conditioning thus resulting in higher stockpiles. In fact, this July can be tagged as the coolest in the U.S. in five years. Not only this, a 13-year seasonal low level in power-plant production also caused considerable disturbance in the natural gas prices, as per Rising Energy Prices Could Boost This Overlooked Sector ETF ).
As a result, gas deliveries to power plants surged 15% (as of August 12, 2014) since June 21. Though injections remain robust in recent times, investors should note that the latest shortage (against the five-year average) for the same time around was the deepest in nine years (as noted by Bloomberg). Amid such a situation, if the weather somehow becomes inclement and continues a little longer, the present scenario might take a turn.
Either way, the trends are not looking that unfavorable in the short term for natural gas investors, as the space could see some momentum shift if the meteorologists’ prediction holds true. As a caveat, investors need to first closely watch the weatherman, and then what happens in EIA storage reports, before betting their money in this corner of the market.
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