Monday, December 9, 2013

Bullish Chart of the Week

I could show you a few bullish charts, but this one really strikes home. Remember when a lot of people were writing off natural gas?

(Updated chart)

Natural gas is surging due to the cold weather that has most of America in its grip. At the end of last week, the average price of natural gas in New England for December settled at $14.52 per million British thermal units (MMBtu), according to the Intercontinental Exchange monthly index. Last year at this time, it was just over $10.

Now, let me show you two more charts. First, who is the big winner from this cold weather? I'd say Marcellus, judging by this EIA chart ...

In fact, the Marcellus region, located in Pennsylvania and West Virginia, is expected to exceed 13 billion cubic feet per day (Bcf/d) this month. That would be 18% of total US natural gas production this month. As recently as 2010, the Marcellus region produced less than 2 Bcf/d.

But sure, cold weather has sent nat-gas higher.  Will it last?  A lot of that depends on the weather.  But here's one more chart, of natural gas in storage ...

Natural gas is near its maximum. But gas in storage is also starting to turn lower, as those big reserves are drawn down. That's a bullish turn of events that should keep nat-gas prices elevated for a while, unless we see unseasonably warm weather.

Place your bets accordingly.  Good luck and good trades.

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