Different approaches to natural gas
Natural gas fell 0.39% between Friday, August 7, and Thursday, August 13. For retail investors who don’t have easy access to the futures market, there are other safer, low-cost avenues for betting on natural gas prices.
One avenue is the United States Natural Gas Fund (UNG), an ETF that tracks prompt natural gas futures. UNG shares trade on the New York Stock Exchange like company stock. UNG rose 0.15% between August 7 and August 13.
Another avenue is the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which holds many US energy companies in its portfolio. Some of these energy companies have exposure to natural gas prices through their upstream gas production operations. Because of the indirect exposure to volatile natural gas prices, an ETF like XOP is a safer, more diversified option for more conservative investors. XOP jumped by ~6% between August 7 and August 13.
As you can see in the above graph, UNG mirrored natural gas prices most of the week, but then it slightly overperformed natural gas prices at the end of the week ended August 13.
XOP overperformed both natural gas and UNG throughout the week. XOP returned the most in the group toward the end of the week. XOP includes US natural gas producers such as Noble Energy (NBL), Devon Energy (DVN), and Antero Resources (AR) in its portfolio. Combined, these companies make up 2.4% of the ETF. AR increased 2.77% between August 7 and August 13, and DVN fell ~0.86%. In the same period. NBL increased by 11%.
You can also gain indirect exposure to energy prices and steady income by investing in MLP ETFs such as the Alerian MLP ETF (AMLP), which holds large US midstream MLP companies such as Enterprise Products Partners (EPD).