What Could Matter to Natural Gas Investors Now?


Nov. 20 2020, Updated 5:05 p.m. ET

UNG’s performance

From March 2, 2017, to March 9, 2017, the United States Natural Gas ETF (UNG) rose 5.7%. Natural gas futures rose 6.1% during the same period. UNG is meant to track active natural gas futures.

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Inventory data

UNG ended March 9, 2017, with a rise of ~2.1%, while natural gas futures rose ~2.5%. The U.S. Energy Information Administration announced that natural gas (GASX) inventories had fallen 68 Bcf (billion cubic feet) in the week ended March 3, 2017. Analysts’ estimates had suggested a fall of 59 Bcf. 

Bullish inventory data led the gains in natural gas prices. However, because of the rise in the number of US oil rigs, the rally could be short-lived.

Does UNG track natural gas futures well?

On March 3, 2016, natural gas active futures hit a 17-year low. UNG rose ~24.2% from March 3, 2016, to March 9, 2017. During that period, natural gas active futures rose 81.3%.

From June 20, 2014, to March 9, 2017, UNG fell ~71.6%, while natural gas active futures fell 34.4%. The nearly two-year downturn in crude oil prices began on June 20, 2014, and lowered the sentiment in the entire energy sector.

The above numbers show UNG’s lower returns compared to those of natural gas active futures. These lower returns have been due to the small losses UNG has suffered when rolling its exposure to active natural gas futures.

Active futures are higher in price than the expiring futures contracts in the fund. Due to this contango structure in the natural gas futures market, UNG has underperformed natural gas over the last few years.

Natural gas exposure

Apart from the United States Crude Oil ETF (USO), which tracks crude oil futures, and the energy equity ETFs we discussed in the previous articles, you may want to look at other ETFs and ETNs to play natural gas prices. These energy ETFs and ETNs include:

  • the ProShares Ultra Bloomberg Natural Gas ETF (BOIL)
  • the First Trust Natural Gas ETF (FCG)
  • the VelocityShares 3x Long Natural Gas ETN (UGAZ)
  • the Direxion Daily Natural Gas Related Bull 3X ETF (GASL)

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