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Analyzing Natural Gas ETFs’ Performance Last Week

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Natural gas ETFs

Between December 28 and January 4, the United States Natural Gas ETF (UNG) fell 8.4%, while the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) fell 17.4%. These ETFs track natural gas futures. UNG holds active natural gas futures contracts, while BOIL tracks daily changes in the Bloomberg Natural Gas Subindex.

UNG has underperformed natural gas February futures, which have fallen 7.8% in the past four trading sessions. Lower natural gas prices could be negative for natural gas–weighted stocks. Cabot Oil & Gas (COG), Chesapeake Energy (CHK), Gulfport Energy (GPOR), and Southwestern Energy (SWN), the weakest natural gas–weighted stocks, rose 0.8%, 4.7%, 7.3%, and 10.5%, respectively, last week. All natural gas–weighted stocks rose.

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Long-term returns and forward curve

Between March 3, 2016, and January 4, 2018, natural gas active futures rose 85.7% from their 17-year low, while UNG and BOIL returned 8.3% and -41.4%, 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. As of January 4, natural gas futures for delivery between February and May 2019 closed in descending order, which could be a positive sign for these ETFs’ returns.

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