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Why Traders Are Getting Into Natural Gas

Wednesday, 6 Mar 2013 | 12:49 PM ET
Natural gas pipelines
Getty Images
Natural gas pipelines

Have you looked at a chart of natural gas lately? (There's one below) If so, you may have noticed that last week, it managed to break out of a well-defined downtrend.

So what's behind the strength?

For starters, U.S. natural gas production has fallen for the first time since August, probably due to reduced rig count.

However, the broader story is definitely the weather.

After last year's record-warm winter, the market has placed this winter under unusually intense scrutiny. Will this be a mean reversion story, where the warm winters prove to be a temporary condition? Or a global warming story, meaning warm winters are here to stay?

Natural gas trading will certainly hinge upon the answer.

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