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Analyzing Natural Gas ETFs and Natural Gas Last Week

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Mar. 5 2018, Published 11:25 a.m. ET

Natural gas ETFs

On February 23–March 2, 2018, the ETFs that are supposed to follow natural gas futures’ price performance had the following performances:

  • The United States Natural Gas ETF (UNG) rose 1.6%.
  • The ProShares Ultra Bloomberg Natural Gas ETF (BOIL) rose 3.4%.

UNG contains the most active contracts of natural gas futures, while BOIL is built to provide two times the returns of the Bloomberg Natural Gas Subindex on a daily basis. Last week, natural gas futures rose 1.4%.

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ETF returns

Between March 3, 2016, and March 2, 2018, natural gas active futures gained 64.4% after falling to their 17-year low. Natural gas ETFs’ performances during this period were:

  • UNG fell 2.5%.
  • BOIL fell 37.2%.

These ETFs’ lower returns compared to natural gas active futures could be because of the negative “roll-yield,” which is generated when expiring futures contracts are trading at lower prices than the following month’s futures contracts.

On March 2, 2018, natural gas futures contracts until August 2018 were priced progressively higher—a factor that could continue the ETFs’ underperformance compared to natural gas’s returns. BOIL’s actual and expected returns could vary due to the compounding effect of daily price changes.

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