How Natural Gas ETFs Reacted to Natural Gas Decline Last Week



Natural gas ETFs

From June 1–8, the performances of natural gas futures-tracking ETFs were as follows:

  • United States Natural Gas ETF (UNG): fell 2.2%
  • ProShares Ultra Bloomberg Natural Gas ETF (BOIL): fell 4.6%

Natural gas July futures fell 2.4% that week. In Part 1, we looked at the factors behind the moves in natural gas last week. UNG holds active natural gas futures contracts. BOIL tracks twice the daily changes of the Bloomberg Natural Gas Subindex on a daily basis.

Last week, Gulfport Energy (GPOR) and Range Resources (RRC) fell 9.7% and 2%, respectively. They were the only stocks that declined on our list of natural gas–weighted stocks. Chesapeake Energy (CHK) rose 6.2%, gaining the most for the period on our list of natural gas–weighted stocks.

Returns of long-term ETFs

From March 3, 2016, to June 8, 2018, natural gas active futures have risen 76.3% from their 17-year low. During that period, UNG rose 1.4%, and BOIL fell 34.8%.

Since March 3, 2016, UNG and BOIL’s returns were lower than the huge gains in natural gas active futures. The negative roll-yield could be behind the lower returns. A negative roll-yield is caused when the prices for expiring futures contracts are lower than the following month’s prices for futures contracts. BOIL’s actual and expected returns could also be different because of the compounding effect of price changes on a daily basis.

As of June 8, the closing prices of natural gas futures contracts for delivery between July and August settled in ascending order. The price pattern could hamper UNG’s and BOIL’s returns.

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