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Did UNG Outperform Natural Gas in the Week Ended October 6?

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Oct. 10 2017, Updated 9:13 a.m. ET

Natural gas and UNG

Between September 29 and October 6, 2017, the United States Natural Gas Fund ETF (UNG) fell 4.9%, while natural gas (BOIL) (GASX) November futures fell 4.8%. UNG track natural gas near-month futures contracts. In the past five trading sessions, UNG fell slightly more than natural gas futures.

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Natural gas active futures

On March 3, 2016, natural gas active futures closed at their 17-year low. Since that time, natural gas prices have recovered 74.7%. However, UNG rose 7.9% during this period. The negative roll yield could be behind the underperformance of UNG.

If the active futures contract expiry is within two weeks, UNG shifts its holdings in active natural gas (FCG)(GASL)(GASX) futures to the following month’s futures contract. As a result, the fund could incur losses if the next month’s futures are priced at higher levels compared to the expiring futures when it shifts its holdings. In this case, the roll yield would be negative.

On October 6, 2017, natural gas futures contracts out to February 2018 settled at progressively higher prices.

In the final part of this series, we’ll discuss the key energy events this week.

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