How To Heat Up Your Portfolio As The Winter Stays Cold [United States Natural Gas Fund, LP, Chesapeake Energy Corporation]

natural gasMike Burnick: Natural resource investors take heart: So far in 2014, commodities and many commodity-related stocks are performing far better than the dismal results posted last year.

It was not easy being a resource bull in 2013, as overall commodity prices rose just 0.8 percent. Stocks by comparison left commodities in the dust with the S&P 500 surging 32.4 percent. And even the flat average results mask deeper carnage in certain commodity markets.

* Agricultural prices took a beating. Wheat prices fell 16 percent, while corn plunged 36 percent.

* Industrial metals were nothing to cheer about either. Nearly every metal from aluminum (down 17 percent) to zinc (1.2 percent decline) fell last year.

* And of course the granddaddy of commodities, gold, plunged 28.7 percent.

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But natural gas was one of the few commodities to buck the downtrend, and saved its best-for-last, with prices surging 15.9 percent in December alone.

Natural gas has continued moving sharply higher as the thermometer plunged throughout most of the U.S. so far this year. Colder than normal weather blanketed much of the U.S. in December and January, triggering draw-downs in natural gas inventories due to heating demand.

At the same time, natural gas production was reduced due to freezing temperatures in the oil and gas patch … a “perfect storm” for higher prices. And this upside move may just be getting started.

That’s because natural gas has a persistent seasonal tendency to rally from February through April, usually driven by demand for heating, which is certainly the case this year.

The move could be even more pronounced this year, because natural gas prices are coming off an extreme low. Prices peaked in mid-2008 and endured a painful bear market in recent years after booming domestic production led to a glut. Natural gas prices collapsed a stunning 68.7 percent from the 2008 peak to last year’s low.

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