What's That Burning Smell? Natural Gas Is On Fire

Natural gas prices have been on a tear in the past few months, jumping nearly 20% as temperatures soar across the country, particularly here in the Northeast.

Since touching a 2011 low of around $3.80 per BTU, natural gas has been on fire (no pun intended) and investors are looking to cash in the move higher, particularly with all of the problems in the equity markets, European debt issues, and other issues.

So how to play natural gas?

There are a variety of ways to play natural gas, whether it's an ETF, or equities. The United States Natural Gas Fund, LP (NYSE: UNG) is an ETF that tracks the price of natural gas, and shares have risen 17.6% since March 10, when natural gas really started to take off. Shares are very volatile every week when the EIA releases its weekly natural gas inventory reports, but given the extreme temperatures the eastern seaboard has seen recently, natural gas drawdowns may become a regularity, leading to higher prices.

There is also the equity component of natural gas plays, such as Chesapeake (NYSE: CHK) or Exxon Mobil (NYSE: XOM). As oil prices hover around $100 per barrel, energy titans such as T. Boone Pickens have called for a switch from gasoline based cars to natural gas cars, which would benefit Chesapeake, run by Aubrey McClendon. Exxon Mobil, with its purchase of XTO Energy, has become the world's largest natural gas company, and any increase in natural gas prices will help Exxon Mobil's bottom line.

Exxon just announced it would be buying two more privately held natural gas companies for $1.69 billion. The acquisitions give Exxon access to 317,000 acres in the Marcellus Shale. Exxon believes that as countries like China and India continue to demand more power, natural gas will increasingly become more important, leading to higher natural gas prices.

It's hot out there, another scorcher with temperatures hitting 100 degrees or above in some parts of the country. Grab an ice cold lemonade, and perhaps think about grabbing some of the above mentioned names to beat the heat, and beat the S&P as well.