Analyzing Natural Gas ETFs’ Returns Last Week


Nov. 20 2020, Updated 4:05 p.m. ET

Natural gas ETFs

On November 23–30, the United States Natural Gas ETF (UNG) rose 2.6%, while the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) rose 5%. These ETFs track natural gas futures. UNG holds active natural gas futures contracts, while BOIL’s objective is to track twice the daily changes of the Bloomberg Natural Gas Subindex.

Natural gas January futures rose 5.9% in the past five trading sessions. UNG and BOIL underperformed natural gas’s rise during this period.

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The upside in natural gas prices could be positive for natural gas–weighted stocks. Southwestern Energy (SWN), Antero Resources (AR), Cabot Oil & Gas (COG), and Gulfport Energy (GPOR), the strongest among the natural gas–weighted stocks, returned -6%, -5.3%,-1.7%, and 0.1% respectively, last week. The remaining natural gas–weighted stocks ended in the red during this period.

Long-term returns

From March 3, 2016, to November 30, 2018, natural gas active futures rose 181.4% from their 17-year low, while UNG and BOIL returned 61.1% and 35.4%, respectively. Since March 3, 2016, UNG and BOIL have delivered lower returns than natural gas active futures, possibly due to a negative roll yield. BOIL’s actual and expected returns could also be different due to daily price changes. In a cost-of-carry model, ETFs’ underperformance due to the negative roll yield reflects storage costs.

Forward curve

As of November 30, natural gas futures for delivery between January and May 2019 closed in descending order, which could be a positive sign for these ETFs’ returns compared to natural gas’s returns.


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