The chart above shows natural gas prices over the last decade, including the price bubble at the beginning of 2008, which was quickly followed by the price crash in 2008 – a nightmare in North American financial history often referred to as the Great Recession. Keep following the chart and you will see that prices surged again two years ago (in response to a winter cold spell), then quickly dropped again. Last winter – another warm one – they dropped to their lowest levels in years. This year, though, great blocks of cold have been shifting south from the Arctic, and prices are rising.

So what’s up? The short answer is that there seems to be a good opportunity to make money in the gas market. While the continent had a slow start to its winter heating season this year, great blocks of frigid air began blowing south from the Arctic a week or so ago, and there is speculation out there that the gas market moves are for real – perhaps for the next couple of years. Peters and Company – a highly regarded firm that focuses on Canadian energy stocks – wrote this week that they were “repeating our call that the North American natural gas market is embarking on a multi-year bullish price run.” Despite the “unusually warm November” we saw last month, the firm says “structural forces are beginning their stranglehold on the market which will require significant increases in U.S. domestic supplies to offset a more normalized heating season.”

America has to take major steps to meet demand, they suggest. In just four short years” – to 2020 – “we are expecting U.S. gas needs for exports and domestic use to rise around 14 billion cubic feet per day,” they write, adding that “such a rate of increase in so short a period of time has never come to pass in the history of the U.S. natural gas market” before. The firm says “increasing domestic demand and export needs over the coming two years” are contributing greatly to the challenge.

The chart above is one way to play this developing situation. UNG – the United States Natural Gas Fund – holds near-month futures contracts in natural gas and swaps on natural gas.

In my chart I have drawn the trend line through the November prices. This seems to me justified, given the mild weather throughout most of North America until the beginning of December.

I’m going to watch this one like a hawk – or, at least listen carefully to this winter’s weather reports.