Gas for Five Months

North American stock indices have been trading mostly in the red today as the trend of weaker US economic data continues, including today's US Durable Goods Orders for the month of June, which declined 1% and missed analysts expectations for a rise.

Continuing my discussion on seasonal plays, natural gas outperforms the last 5 months of the year based on work by Don Vialoux. Natural gas is used for furnaces, hot water tanks and to produce a portion of electrical power. By the way, based on recent legislation, the portion of natural gas used to produce electrical power will most likely increase in the medium-to-long-term.

There are two high consumption times for natural gas - winter and summer. The colder it is in winter, the more natural gas is consumed to keep furnaces going. The hotter it is in summer, the more natural gas is consumed to produce electrical power to keep air conditioners going. Hurricane season in the Gulf of Mexico can also influence the price of natural gas as this is the time distributors are accumulating natural gas inventories for the winter heating season. The result is that natural gas prices tend to rise the last five months of the year.

Before I sign off, ScotiaMcLeod's July edition of 'Fund Research Monthly' titled 'Gold Update - Is all that glitters still gold' is available. If you'd like a copy ask us at yourlifeyourplan.ca or call 250-878-7372.

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