Natural gas prices have risen to a one-year high amid a glut in supply caused by the slowdown in gas output and increased demand from utilities that are converting from coal.
Many experts anticipate further appreciation as the weather gets colder, The Wall Street Journal reports. The winter normally brings higher gas prices, and many meteorologists anticipate a much colder winter this year than last.
December natural gas futures closed at $3.70 per million British thermal units on the New York Mercantile Exchange Thursday.
Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible
The market has reversed from April, when booming production and sluggish demand sent natural gas prices to a 10-year low.
"We're coming out of the bust," Eric Mintz, a portfolio manager at Eagle Asset Management, tells The Journal. "I am optimistic that supply will be down next year and demand will be up."
He is buying natural gas producer stocks for Eagle’s Mid-Cap Growth fund.
Apparently Mintz isn’t alone. Money managers, such as hedge funds, have been net long of natural gas futures and options for the last six weeks, according to the U.S. Commodity Futures Trading Commission. Long positions outnumbered shorts by more than 17,000 contracts as of Nov. 6.
But be careful before jumping into the market. As Duke Energy CEO reportedly warned, “Ben Franklin said there are two certainties in life: death and taxes. To that, I would add the price volatility of natural gas.”
Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible
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