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Weather Doesn't Mean Much for Long Term Natural Gas Prices

By Joel South and Taylor Muckerman – Jan 16, 2014 at 10:05AM

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Spikes or drops in prices blamed on weather are only short-term in nature. The real price movements over the long-term will be caused by increased demand from companies like Dow Chemical, LyondellBasell and Valero Energy.

This segment is from Tuesday's edition of 'Digging for Value', in which sector analysts Joel South and Taylor Muckerman discuss energy & materials news with host Alison Southwick. The twice-weekly show can be viewed on Tuesdays & Thursdays. It can also be found on Twitter, along with our extended coverage of the energy & materials sectors @TMFEnergy.

The dreaded "Polar Vortex" brought frigid temperatures throughout the United States. As a result, natural gas prices spiked. However, these weather-related blips are generally short-term in nature. In our analysts' minds, investors -- not traders -- should pay little attention to weather's affect on pricing. Instead pay attention to long-term demand trends, especially from the chemical sector with companies like Dow Chemical (DOW), LyondellBasell (LYB 1.86%) and Valero Energy (VLO -0.99%) sporting plans to spend several billion dollars on facilities that will use natural gas as a feedstock. More analysis can be found in the short clip below.

Joel South has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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