"Natural Gas Prices Strongly Higher on Arrival of Cold Spell"

Front futures  $4.637, up $0.206. Daily top-tick: $4.648.
We've exceeded what I thought was a 'fair' price for the commodity (the December highs). More after the jump.
Someone, it may have been Goldman has suggested the market may need to see $4.50-5.00 for the industry to start drilling again, which lack of drilling is exemplified by the Baker Hughes rig count reported last week, 365 drilling for gas, down over 75% from the 2008 highs:

In addition the supply/demand picture gets a bit complicated here with $3.50 or so being a price where it becomes cost efficient for some utilities to switch from gas back to coal, thus reducing demand and $5.00 being the minimum for some of the E&P's to avoid doing Ponzi finance (drill wells that can never recover their total costs at last year's lower prices-in order to show cash flow enabling more fund raising to finance more drilling, all the while praying for $6.00).
From the CME:

The spot Nat Gas futures contract breached the $4.50/mmbtu level in overnight trading and if it remains above the level on the close it will be entering the $4.50 to $4.80/mmbtu trading range. As of this writing the spot contract is strongly higher (by almost 4 percent). The spot contract is now near a three month high as another round of bitterly cold temperatures head to the eastern half of the US. The Nat Gas market is clearly in a good old fashioned cold winter trading pattern with one major exception… robust production rates has so far dampened the impact of the winter to a certain degree.

Historically, this type of a winter heating season would normally be wreaking havoc with Nat Gas supplies over a much broader area than what we have seen so far as well as sending both cash and futures prices surging higher for a sustainable period of time. As shown in the following chart the winter of 2013/14 through January 10th has experienced the largest level of net withdrawals from inventory since 2000 according to the EIA. Yet the spot futures contract is still only trading at around the $4.50/mmbtu level as the shale production revolution has continued to dampen the impact of a very cold winter season… so far.

The latest six to ten day NOAA forecast is projecting very cold temperatures over the eastern half of the US for the last week or so of January with the cold starting to settle in already this week. The eight to fourteen day forecast is also projecting cold temperatures over the eastern half of the US but with the severity of the cold projected to begin to moderate as we head into February with the arctic cold expected over a small area of the east coast.

Several private forecasters are expecting more of the polar like weather on and off over the next several weeks with one suggesting it could last through the entire month of February. If the cold pattern hangs around for a sustainable period of time not only will cash prices surge higher but the dampening effect seen so far in the futures market could begin to change with futures hitting much higher levels than where they are currently trading at the moment.

Technically the spot futures contract is now entering a new trading range with $4.80/mmbtu the next resistance level. This level was last hit at the end of last winter (end March/early April). Beyond the $4.80/mmbtu level will be the psychological $5/mmbtu level a trading area the market has not seen since the middle of 2011 and that was for only a short period of time.

This week I am projecting a below normal net withdrawal of 110 BCF from inventory. My projection for this week is shown in the following table and is based on a week that experienced a modest level of above normal temperatures over major portions of the US. Bottom line the inventory deficit will narrow modestly this week versus last year and the so called normal five year average if the actual numbers are in sync with my projections....MORE

Back on Jan. 9 we suggested buying Exploration & Production companies for the first time in years just because the certainty level seemed higher with the equities than the futures, not out of any deep insight (bold highlighting done today):
Natural Gas: Price Collapses on EIA Numbers, Market Yawns at Next Week's Projected 300 Bcf Withdrawal Report

After hitting $4.4300 on Tuesday (from $4.2560 Friday, memento mori) the front futures have fallen to $4.0300, down $0.1860 just today and barely above the day's low of $3.9990.

And I'm thinking it may be time to look for some gas producer stocks.

The estimated withdrawal to be reported Jan. 16 report is far and away a record at the same time volume in storage is 10% below the five-year average and Tuesday's STEO says marketed production grows at an average rate of 2.1% in 2014 and 1.3% in 2015.

Production growth is slowing at the same time we've convinced utilities to switch wholeheartedly from coal and the government does by administrative orders what it can't do by parliamentary means (see this week's New Source rules from the EPA in the Federal register).

So, it's either equities or longer-dated futures, we just passed a turning point kids.
Here are some instruments to give you ideas should you not have a four-star, weekend special, single-stock  guaranteed lock on the tip of your tongue.

AMEX NATURAL GAS INDEX (XNG) 791.11 Down 11.57 (1.43%)
First Trust ISE Revere Natural Gas (FCG), $18.94-0.32 (-1.66%) which is the basis for the triple-levered Direxion Daily Natural Gas Related Bull 3x ETF (GASL), $30.82-1.73 (-5.31%), which is not something to buy til death do you part but which should hold its own while the inverse GASX, $27.81 +1.36 (+5.14%) collapses giving you a pair trade.
Do note the leverage in the last two....

So there you go.