It is not mere coincidence that United States Natural Gas, (NYSE: UNG), the exchange traded fund for natural gas, rises in price when temperature drops.
That is now happening as United States Natural Gas is up 4.75 percent for the week (chart below).
Investors should expect more of that trajectory for the share price. When the temperature drops in the United States, there is a demand for more electricity. As natural gas provides much of the electricity in the United States, that increases the demand. Due to an infrastructure that is still lacking, the price for natural gas will rise. There is plenty of natural gas in America, but not nearly enough pipeline networks.
As a result, the price rises when the temperature drops as it did this week.
More should come as a harsh winter is expected. This is not just theory. This is what happened last winter. It was cold, cold winter in the United States, especially New England. From that, the price of United States Natural Gas soared.
Demand should start increasing from abroad.
The United States Government has granted more export licenses for natural gas. North American has a unique set of factors that has led to it becoming the global energy powerhouse. Investors favor the economic security and political stability of North America. Billions have come from abroad to be spent on buying energy assets in the United States and Canada.
Natural gas is especially appealing.
It is, by far, the cleanest fossil fuel. Countries around the world are doing what they can to reduce the usage of coal due to the damage to the environment. Natural gas is the obvious choice. Due to the unique nature of the energy industry in Canada and the United States, it is being imported from North America. This will increase the demand for natural gas, which should increase the share price of United States Natural Gas even higher as temperatures get lower!