How Nat Gas Stocks Could Benefit From The Coldest December Of The Century

The first half of December 2016 has been seasonably cold throughout most of the United States, and the forecast for the second half of the month isn’t looking much better. While the country is cooling down, natural gas stocks are heating up. The United States Natural Gas Fund, LP UNG is up 26.4 percent in the past month. At the same time, the VelocityShares 3X Long Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess Return UGAZ has spiked 86.7 percent while the VelocityShares 3X Inverse Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess Return DGAZ is down 54.4 percent.

Just how cold has this December been?

Century's Coldest December

“In the Midwest and Northeast, some areas could experience their lowest December temperatures of this century,” AccuWeather Chief Meteorologist Elliott Abrams said. Abrams is referring only to years after 2000, but that’s still quite a chilling statement.

What It Means For Natural Gas

Earlier this year, natural gas prices dipped below $2.00 for the first time in more than a decade. Now, natural gas prices are on pace to finish the year at their highest level since 2014.

According to some analysts, there is plenty of upside left for natural gas. Back in October, Johnson Rice analyst John Rowan told Benzinga that there isn’t much drilling going on for natural gas these days. He accurately predicted that gas prices could hit $3.50 by year’s end.

Looking ahead, Rowan sees gas prices above $4.00 by March and above $5.00 by next summer before settling down into the $3–4 range in the long term.

If Rowan in correct, the natural gas trade cold sill be in its early innings.