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Natural Gas Stocks Take Off Despite Calls For Warmer Weather

Natural gas prices are firmer on Tuesday, with the forward one-month February futures currently up 19.9 cents at $3.302 a million British thermal units on the New York Mercantile Exchange.

Natural Gas Stocks Head Northward

Along with the increase in natural gas prices, natural gas stocks are also rallying, with the VelocityShares 3X Long Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess Return advancing over 15 percent. The VelocityShares 3X Long Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess Return, which is an inverse ETN is plunging over 16 percent.

Bearish Weather Forecasts Ignored

The move has come despite weathermen predicting warmer winter weather, with an increased probability for above normal temperatures for most of the United States, through mid-January. ETF Trends, citing the Climate Prediction Center, said only the Pacific Northwest and parts of the far Northern Great Plains are likely to see below-normal temperatures through January 18.

Natural gas is used in some homes for heating. So, the probability of warmer weather dampens the demand outlook for the commodity, which is bearish for prices.

However, there are views that even in a normal winter season, higher demand for natural gas to heat homes and by power plants along with lower production will chip away inventories and in turn boost prices.

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