NEW YORK ( TheStreet) -- Oversupply in the natural gas market has taken its toll on the commodity, but some investors are flocking to it -- and for good reason.
First, the regions of the U.S. that historically have used natural gas are expected to witness colder temperatures than normal this winter. According to the National Oceanic and Atmospheric Administration, winter temperatures from southern and eastern Texas to southern Pennsylvania and down to the tip of Florida are expected to be colder than normal, which would increase demand for natural gas.
Second, macroeconomic conditions are favorable for this resource. An unstable dollar, fears of inflation and low interest rates are making commodities attractive. Many investors have jumped into gold, but crude oil and natural gas also provide a hedge against inflation and a declining dollar.
Third, expected economic growth in the U.S. and abroad is expected to boost consumption in residential, commercial and industrial sectors. Additionally, the Energy Information Administration expects total marketed natural gas production to decline by 3.1% in 2010, reducing the excess supply that has flooded the market.Some equities that could benefit from these trends include: Chesapeake Energy (CHK), which closed at $22.44 Wednesday, up 66% from its March low of $13.50. Piedmont Natural Gas (PNY), which closed at $24.80 Wednesday, up 17% from its March low of $21.25.
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