Natural Gas Is Catching Fire

By Commodity HQ  APR 12, 2013 11:20 AM

The price of natural gas is up 20% year-to-date. Here are three stocks to play the surge.

 


High daily volumes coupled with erratic and sometimes unpredictable movements have given natural gas a big name in the commodity world, along with a reputation as a risky investment. With NG jumping more than 20% year-to-date and still climbing, many analysts are looking for a spark behind these gains, and they’re wondering how long the trend will last.

Storage Stimulation

The US Energy Information Admission released a report earlier this week showing that storage figures of natural gas (NG) have dropped significantly in the last month, with the national average 32% lower than this time last year and 2.1% below the five-year average. These figures point to higher consumption of the commodity compared to this time last year. After a long winter and a relatively cooler spring in the Midwest and along the East Coast, it is not surprising to see that consumers are leaving the heat on later in the year. The result of cooler temperatures and increased demand have stimulated NG prices, which investors are taking as a bullish sign for the commodity.

Energy of the Future

Advances in hydraulic fracturing (fracking) as well as horizontal drilling have helped unlock huge reserves of natural gas within countries–such as the U.S. and Russia–that historically required external sources to meet domestic demands. This abundance of gas is so high that prices bottomed out early last year before bouncing back during the cold winter. Considered by many analysts to be one of the most promising avenues of energy development due to its relative cleanliness, abundance and inexpensive nature, many U.S. firms have already made efforts to update their technology to better exploit this surplus of domestic natural gas.

Ways to Play

Below, we outline several options for traders looking to take advantage of the upswing in natural gas prices.
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Editor's note: This article by Carolyn Pairitz was originally published on Commodity HQ.
No positions in stocks mentioned.