At the start of May we warned of a huge price move coming in natural gas and as predicted prices exploded to the upside last week and this is only the start of the move.

Natural Gas is a great long term investment, supply is simply out stripping demand and its an easy investment to understand and trade.

Lets look at this fantastic trade in more detail and how you can trade it with unlimited profit potential and limited risk.

Seasonal demand 14% Price rise last week!

The demand for natural gas is seasonal and as the hot weather kicks in demand soars due to increased demand for air conditioning.

Natural gas closed up 14% on the week. The contract rallied 7% on Thursday alone on expectations that the above-average temperatures forecast across much of the U.S. for the weekend which boosts consumption as consumers increase usage of air-conditioning systems. Weekly supply data was also bullish for prices.

Further good news for the bulls is we are approaching the height of the cooling season and the gas surplus should continue to decline as we enter a period of peak demand.

While this trade has already made great gains in a short period of time on the above seasonal, its the longer term picture thats even more exciting.

The longer term picture

Natural Gas is colorless, shapeless, and, odorless. For many years, it was discarded as worthless but is now considered one of the most valuable fuels on earth and the supply and demand picture is compelling.

Long Term Demand

Natural gas is a source of fuel for the US which is domestically produced and is free of the geo political concerns that surround the supply of crude oil.

In fact, natural gas now provides 20% of all the energy used in the United States.

It is very important in private homes, where it supplies nearly half of all energy needs domestically. Natural gas is also popular in industry and used in an increasing number of power plants to generate electricity and factories are also using more gas as well.

We have strong short term demand and this is supported by strong long term fundamentals.

Long Term Supply

Demand for natural gas in North America is increasing at around 3% per year, while production is lagging at about 1%.

Older wells are running out and newer wells are not producing quickly enough. For the next few years at least supply will not be able to keep pace with demand and prices will continue to remain firm. The trend of demand outpacing supply will continue at least through to 2008, when liquefied natural gas is expected to be able to help meet rising demand, but until then far higher prices are expected.

Gas Is Cheap!

Natural gas has fallen over 50% from its 2005 peak and is now moving higher and has plenty of room on the upside.

This is a simple investment

Its not rocket science why gas prices are moving higher its simple supply and demand! While many traders have focused on crude oil they should also be looking at gas as its rising on the back of strong crude prices as the US looks for alternative fuel sources. Be careful

Natural gas is an extremely volatile contract and traders need to proceed with caution. This is why we recommend options as a trading vehicle - Not only do you get unlimited gains you also have the comfort of limited risk.

Its always difficult to predict when a market is going to take off and we saw prices decline after our last recommendation, but options give staying power in this situation to ride out dips to the downside.

If you want a simple trade that is making money fast, look no further than natural gas. Look for buying opportunities with options. Buy options in or at the money, with plenty of time value, to stay with this great long term bull market.