Last year was not a good year for commodities. Copper had its worst year since 2009, and the price of corn fell 40 percent.
However, the one bright spot in commodities was natural gas, which performed extremely well. Rising 26 percent on the year, natural gas was the clear winner in the commodities market in 2013.
This is an upward trend we expect to continue. On the demand side, natural gas-powered electrical generation plants will continue to replace coal-powered plants in the next couple years.
On the supply side, the number of natural gas rigs has fallen dramatically since 2008 — over 75 percent. Almost 70 gas rigs were removed in 2013 alone bringing the total number of gas rigs working to just 372 at the end of the year. And that's during a year when prices rose dramatically, having more than doubled from their lows in 2012. The small number of gas rigs working last year was down from more than 1,600 in 2008 and is one of the lowest levels in more than a decade.
January is typically the seasonal peak for natural gas prices. So we could see some pullback on prices as the weather gets warmer. But with limited supply and rising demand, expect natural gas to rise in the long term, even after adjusting for seasonal variations.
Honestly, I thought natural gas would break the $5 mark this season. It hasn't, and might not, but having risen to nearly $4.50 it is clearly poised to break that mark next winter, and might even reach $6. The indicators are very favorable, and I expect natural gas to be another bright spot in an otherwise weak commodities market in 2014.
About the Author: Robert Wiedemer
Robert Wiedemer is a managing director of Absolute Investment Management, an investment-advisory firm for individuals with more than $300 million under management. He is a regular contributor to the Financial Intelligence Report, the flagship investment newsletter of Newsmax Media. Click Here to read more of his articles. Discover more about his latest book, "Aftershock," by Clicking Here Now.
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