So it is hurricane season again in the Gulf of Mexico, and what is happening to natural gas prices and the U.S. Natural Gas Fund ETF (UNG)? Absolutely nothing. How can such a cheap commodity get even cheaper given such a threat to supply? Just maybe the problem is not supply. Maybe the real problem is demand or lack thereof? Perhaps a hurricane that knocks out power to a portion of the Gulf States creates a bigger demand problem by eliminating more of it than the weak economic conditions already has? The damage will take time to get back on line, which will create excess natural gas supplies for the local market to absorb.

So, in a very counter-intuitive sort of way, the threat of a hurricane now actually has the potential to pressure natural gas prices. What we need is for the economy to create natural demand that will reduce inventory, and then, at that point, a hurricane will elicit a bullish market response. With the above in mind, I have no idesire to buy the UNG here, nor do I intend to sell short. Time to watch only.

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.