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Analyzing Natural Gas ETFs’ Performances Last Week

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Natural gas ETFs

On May 11–18, the ETFs that track natural gas futures had the following performances:

  • The United States Natural Gas ETF (UNG) rose 1%.
  • The ProShares Ultra Bloomberg Natural Gas ETF (BOIL) rose 2.6%.

On May 11–18, natural gas June futures rose 1.5%. In Part 1, we discussed the factors behind natural gas’s moves during this period. 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 May 18, 2018, natural gas active futures rose 73.7% from their 17-year low. During this period, UNG rose 0.1%, while BOIL fell 36.2%.

Since March 3, 2016, UNG and BOIL’s returns were less compared to huge gains 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 also be different because of the compounding effect of price changes on a daily basis.

On May 18, the closing prices of natural gas futures contracts for delivery between June and August 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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