United States Natural Gas (NYSE: UNG), the main exchange traded fund for natural gas, is up for the week. Cold weather has the demand for natural gas increasing, which takes the share price of United States Natural Gas higher. That is needed as United States Natural Gas is down for the last month, quarter, six months, and year of market action (chart below).
It is much the same story for United States Oil (NYSE: USO), the main exchange traded fund for oil.
Economic growth is still sluggish while production of oil and natural gas is roaring. That creates a surplus of oil and natural gas. When that happens, the price falls. That is certainly reflected in the price trajectories of United States Natural Gas and United States Oil. Energy company stocks such as Chevron (NYSE: CVX), ExxonMobil (NYSE: XOM), and others have also fallen in price.
Cold weather increases the demand for natural gas as it is used to power electric utilities.
Greater amounts of electricity are used in cold weather to heat houses, factories, office buildings, and other facilities across the United States. While there is plenty of natural gas in America, the distribution network is still lacking. That takes the price of natural gas higher when demand goes up in cold weather. This also happens in hot weather as more electricity is used for run air conditioning to cool off homes and businesses
.The United States is entering the coldest period of the year.
Traditionally, that has been very bullish for United States Natural Gas as the demand for natural gas soars during this period. The recent price surge is certainly bullish for the future for United States Natural Gas with cold weather setting into the heavily populated areas of the East Coast of America. If this keeps up, so should the higher share prices for United States Natural Gas.