UNG Mirrored Natural Gas Last Week while XOP Remained Flat


Nov. 20 2020, Updated 4:00 p.m. ET

Different approaches to natural gas

Natural gas futures increased by 9.07% between Friday, June 5, and Thursday, June 11. For retail investors, who don’t have easy access to the futures market, there are safer, low-cost avenues to bet on natural gas prices.

The first option is the United States Natural Gas Fund (UNG)—an ETF that tracks prompt natural gas futures. UNG shares trade on the NYSE like a company stock. They gained 9.09% last week.

Article continues below advertisement

The second option is an ETF like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which holds many US energy companies. Many of these energy companies have exposure to natural gas prices due to their upstream (gas production) operations. So, because of the indirect exposure to volatile natural gas prices, an ETF like XOP is a safer, more diversified option for more conservative investors. But XOP rose just 0.4% last week.

Comparing performance

As we can see in the graph above, natural gas and UNG had a great week. UNG tracked returns from natural gas. However, as we discussed in the last part of this series, natural gas fell later in the week but remained higher than the previous Friday’s levels. This was also the case for UNG.

XOP underperformed both NG and UNG throughout the week. It also ended on Thursday with lower returns compared to both natural gas and UNG. Its lower returns were because of XOP’s indirect exposure to natural gas prices and because XOP also includes companies with exposure to crude oil prices, which were volatile last week. Follow our weekly recap of crude oil prices on our Energy and Power page.

XOP holds premier US gas producers like Noble Energy (NBL), Range Resources (RRC), and PDC Energy (PDCE). NBL and RRC are also part of the iShares US Energy ETF (IYE), making up ~1.6% of the ETF.


More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.