Natural Gas: How to Stay Warm (and Profit) This Winter Season

[Ed. Note: Greg Guenthner continues to find profitable opportunities in the energy markets, which he’s been tracking closely. This time, it’s natural gas. Read on…]

Right now, the city of Buffalo, NY is covered in five feet of snow, with maybe another three on the way. We’re talking about eight feet of snow here. And it’s not even Thanksgiving!

Yeah, bad news for those poor folks. But good news for you. Because now that another harsh winter is upon us… you have a massive opportunity for quick double-digit gains…

Natural gas [has]… already broken out of its summer rut. A big, tradable spike is next.

How? From buying natural gas. There’s going to be a huge demand for it this winter. And according to its most recent forecast, the Energy Department predicts residential natural gas prices for November through February will rise 7% compared to the same period last year. I think it’ll spike even higher. Meanwhile, natural gas storage is about 400 billion cubic feet lower than a year ago. Lower available supply and higher demand equals one thing – higher prices.

I’ll show you how to play this potentially blockbusting trade in a minute. And the best part? The upside on this trade is enormous…while the downside is minimal. I’ll also explain why that is.

Let’s take a closer look at what’s happening…

Natural gas has been insanely cheap for years. We’re producing more natural gas now than we have in my entire lifetime thanks to the bustling Bakken field in North Dakota. In fact, the United States just recently surpassed natural gas production levels from 1970. All-time highs are here, baby. Of course, this gas glut has also depressed prices.

If you were in London, your natty bill would be 225% higher were it not for the glut of natural gas. Japan? Forget it. 400% higher… Don’t believe me? Take a look:

World LNG Estimated October 2014 Landed Prices

But we’re headed for a spike in natural gas prices, especially if this winter is anything like the last. Remember last winter? Colder than average temperatures helped spike natural gas prices to $6.50 back in February (we’re looking at prices close to $4.40 today).

And it looks like this winter could bring more of the same. It’s already pretty damn cold out there. This little record-breaking snowstorm in Buffalo is just the beginning. As Matt Rogers, a meteorologist at the Commodity Weather Group, which forecasts weather and heating demand for energy companies, says, “There’s pretty good consensus for a cold winter overall.”

And that polar vortex from last year? Oh yeah, it’s back in action again. And according to Accuweather, “The polar vortex, the culprit responsible for several days of below-zero temperatures last year, will slip down into the region from time to time, delivering blasts of arctic air.” Only this time, it’s early…

It’s already taking its toll on power suppliers. As the Cleveland Plain Dealer reports, “Electric customers in 13 states including Ohio on Tuesday set a record for November demand.” Ohio and Pennsylvania area already urging folks to conserve gas and electricity. So it’s only a matter of time before we see these cold temps spook the energy market.

And it doesn’t hurt that energy stocks are already beginning to pull themselves out of the gutter this week. In fact, the Energy Select Sector SPDR ETF (NYSE:XLE) was one of yesterday’s best performers. It gained more than 1.25% as it continues to bounce off its October lows.

With more oil and gas coming from domestic sources the price of natural gas is very “user friendly”.

Natural gas is next in line for a big pop. It’s already broken out of its summer rut. A big, tradable spike is next. And it could be a doozy.

So go ahead, venture outside and build a snowman if you live in one of the colder areas of the country. You’ll have your huge natty gas gains waiting to keep you warm when you come back inside.

One more thing before you go…

I’ve got to admit, we’re pretty lucky as Americans.

You see, today’s article highlights a potential uptrend in natural gas — which is currently trading around $4.50 per MMbtu. With a cold winter bearing down on the U.S. we may see prices hit, say, $6.

Years ago, however, the price to heat our homes may have been closer to $12 or $15 in these cold winter months.

What happened?

Well it’s all part of an ongoing story in America, a rebirth of American energy!

With more oil and gas coming from domestic sources the price of natural gas is very “user friendly”.

Regards,

Greg Guenthner
for The Daily Reckoning

Ed. Note: Go ahead, venture outside and build a snowman if you live in one of the colder areas of the country. You’ll have your huge natty gas gains waiting to keep you warm when you come back inside. If you want to cash in on the biggest profits this market has to offer, sign up for my Rude Awakening e-letter, for FREE, right here.