Speculators Delight: Weather
October 5th, 2006 by Grant in: EnergyWhether you have a financial interest in oil, natural gas, wheat, soy beans, corn, or any other crop for that matter, the weather can be your saving grace, or the nail in your coffin.
With natural gas ($natgas: chart) it seems, the weather is nothing more than an excuse for the days trading pattern. When temperatures go up next week, natural gas prices go down today. Unless of course you think the increase in temperature will cause an increase in electrical demand, further stimulating the increase in price of natural gas.
Even if supplies fall, weather forecasts can trump any and all rational market activity and tip the scales in favor of whoever screams loudest at the speculating table.
Last week, weather forecasts had warmer than average temperatures blanketing most of the U.S. for the better part of this week. Natural gas prices went up due to the fact that, with warmer temperatures come increase in electrical demand for cooling.
Now, we’ve got reports that the thermometer will fall, further increasing demand from those who use natural gas for heating their homes.
Natural gas demand typically peaks in mid-November when demand for warmth is highest.
Notice that nothing in this post reflects current supply and demand, or any other fundamental analysis. Just evidence that speculation rules when it comes commodities affected by weather.
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