Velocityshares 3X Long Natural Gas ETN (UGAZ)

[Rock_nj]

I think nat gas traders are skeptical of forecasted cold waves, since they have all busted since the big November arctic outbreak. There are a lot of forecasters now focusing on a new arctic cold wave heading for the U.S. around the end of December into early January, such as:

Exceptional wave breaking event and blocking AK ridge setting up next week forcing arctic air down across the US pic.twitter.com/VyXxU0DZDN

— Mike Ventrice (@MJVentrice) December 21, 2014

and https://twitter.com/BigJoeBastardi/status/546726717340278785/photo/1 and http://epawaweather.com/weather-weeklies/ (for a video discussion of the setup that could bring arctic air into the U.S.).

Whether or not a cold wave materializes and whether it ushers in a colder pattern change for the U.S. is crucial to the price of nat gas over the next few months. There is even talk of the dreaded Polar Vortex returning, as a Sudden Stratospheric Warming event is predicted soon for Siberia, which is what sends the Polar Vortex into North America. We'll see what happens.

As far as I can tell, the primary reason why nat gas has sold off recently, besides support levels being broken last week, is that there is a view that the nat gas markets are amply supplied, with production continuing to increase. That storage will get through this winter just fine until injection season starts in the spring. We need to see sustained cold and some impressive 200+ bcf withdraws in January to get a sense of panic to enter the nat gas markets and drive up prices.