Natural Gas, the commodity many of us ignore when investing yet use actively in real life. Natural gas is what almost half of all U.S. homes use for heating and it is an essential source of energy for modern life. And with January Chills creeping in and the next few months keeping the Northern Hemisphere cold, Natural gas usage will likely increase with more people heating their homes.
The correlation between temperature and natural gas is inversely related. When temperatures fall, natural gas prices tend to rise. Recently this trend has proven true with Bespoke Weather Services shifting their weather models to “materially colder” for parts of the US through mid-January and The NGSA expecting this Winter to be 4% colder than last winter. With this accounted for, investors sent the Natural Gas February Nymex contracts jumping 3.5% on Monday.
Despite these potential short to medium term positions, many analysts are wary of Natural Gas in the long term, with Natural Gas stocks historically lagging behind the market at large for the past 10 years. Another area of concern is the COVID-19 pandemic, however, those in the industry have kept headstrong with NGSA Chairman Orlando Alvarez saying and I quote “While the Covid-19 pandemic has made economic forecasting as challenging as forecasting the weather, the fundamentals in the outlook show market resiliency that should provide certainty to consumers this winter,”. Do you agree with Alvarez? Or do you think COVID will have a larger impact on Natural Gas this Winter?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.