Comparing Natural Gas ETFs and Natural Gas Prices



Natural gas ETFs

On April 6–13, 2018, the ETFs that follow natural gas futures had the following performances:

  • The United States Natural Gas ETF (UNG) rose 1.5%.
  • The ProShares Ultra Bloomberg Natural Gas ETF (BOIL) rose 1.5%.

On April 6–13, 2018, natural gas May futures rose 1.3%. In Part 1, we discussed the factors that supported natural gas in the trailing week. UNG holds active natural gas futures contracts. BOIL tracks twice the daily changes of the Bloomberg Natural Gas Subindex on a daily basis.

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Long-term ETFs’ returns

From March 3, 2016, to April 13, 2018, natural gas active futures rose 66.9% from their 17-year low. During this period, natural gas tracking ETFs UNG and BOIL fell 2.5% and 38.6%, respectively.

Since March 3, 2016, UNG and BOIL’s returns were in the negative zone—compared to over a 60% gain in natural gas active futures. The negative “roll-yield” might be behind the lower returns. A negative roll-yield is caused when expiring futures contracts’ prices are lower than the following month’s futures contracts’ prices. BOIL’s actual and expected returns could be different because of the compounding effect of price changes on a daily basis.

On April 13, 2018, the closing prices of natural gas futures contracts for delivery between May and August 2018 settled in an ascending order. The price pattern might hamper UNG and BOIL’s returns compared to natural gas’s returns.


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