Did Natural Gas ETFs Rise More than Natural Gas?



Natural gas ETFs

On March 23–29, 2018, the ETFs that follow natural gas futures had the following returns:

  • The United States Natural Gas ETF (UNG) rose 4%.
  • The ProShares Ultra Bloomberg Natural Gas ETF (BOIL) rose 8.2%.

In the last four trading sessions, natural gas May futures rose 3.8%. So, UNG and BOIL outperformed natural gas May futures during this period.

UNG holds active natural gas futures contracts. BOIL follows twice the daily changes of the Bloomberg Natural Gas Subindex on a daily basis.

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Long-term natural gas ETFs’ returns

Between March 3, 2016, and March 29, 2018, natural gas active futures rose 66.7% from their 17-year low. During this period, UNG and BOIL fell 2.6% and 37.7%, respectively.

Since March 3, 2016, the ETFs’ returns were in the negative zone compared to natural gas futures’ returns in the positive territory. The negative “roll-yield” might have caused the negative returns. A negative roll-yield is caused when expiring futures contracts’ prices are below 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 March 29, 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 limit the upside in ETFs like UNG.


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