Time To Buy This Natural Gas ETF? [First Trust ISE Revere Natural Gas (ETF), United States Natural Gas Fund, LP]

natural gasThe country is shivering with fears of another polar vortex with the winter approaching. Bloomberg recently reported heavy snow in Siberia, like last year, and some believe a great deal of snow in this region indicates how much freezing air will spill into the U.S. later this year, suggesting another brutal winter may be ahead of us.

Though Judah Cohen, director of seasonal forecasting at Atmospheric and Environmental Research was quoted By Bloomberg saying “It’s still early in the game”, the director indicated that there has already been an alarming start to snowfall. The analyst indicated that he needs some more time to analyze the trend before making a precise prediction, as noted by Bloomberg.

The ominous initial trend can be validated by the ‘snowcover’ data computed by Cohen.  As of October 13, 12.2 million square kilometers of Eurasia were roofed by snow relative to 10.8 million square kilometers from the year-ago date.

This rupture of potential chilly weather could definitely boost electricity demand across the region putting natural gas in focus. If this was not enough, the latest prediction of U.S. Energy Information Administration (EIA) indicated that people may have to shell out more money (by about 6%) for natural gas requirement in the winter of 2015.

This is true in the light of the fact that although natural gas inventory is rising fast, the latest stock piles still hover below the year-earlier and five-year averages.  For the week ended October 10, natural gas inventory remained 9.4% lower than the year-ago period and 9.9% lower than the five-year average, per EIA.

Market Impact

Thanks to this trend, the downslide in natural gas prices, which was being noticed for quite some time, was finally arrested. Prices in fact bucked the trend for a recovery on Thursday (October 16) trading, though the changes were not great. In fact, the ETF tracking the natural gas futures – United States Natural Gas ETF – shed about 0.1% on October 16.

In such a situation, an equity version of the natural gas could be a better choice to play the segment. Whatever the case and prediction, the U.S. is entering the coldest months of the year with subdued gas inventories. This is the reason why companies producing the commodity will try every means to churn out higher output before any downside knocks the door.

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