Natural Gas Futures Spread: Are Traders Confused?



Forward curve and natural gas ETFs

As of June 25, the natural gas futures contracts for delivery between August and September were priced in descending order. The forward curve is important for ETFs that follow natural gas futures including the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) and the United States Natural Gas ETF (UNG).

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Analyzing the forward curve

If the active futures contract expiry is within two weeks, UNG shifts its holdings in active natural gas futures to the following month’s futures contract. As a result, the fund could incur losses if next month’s futures are priced at higher levels compared to the expiring futures when it shifts its holdings. BOIL is also impacted by the upward sloping forward curve. However, with the forward curve sloping downward for the next two months, these ETFs might benefit. On June 18–25, natural gas August futures fell 1.1%, UNG fell 2.1%, and BOIL fell 5.6%.

Futures spread

On June 26, the natural gas futures for August 2019 closed at a discount of ~$0.23 to the August 2020 futures. On June 18, the futures spread was at a discount of $0.24.

The market sentiment toward natural gas’s demand-supply situation is reflected in the futures spread. The futures spread and natural gas prices tend to move in the same direction. In the trailing week, the futures spread’s discount contracted. However, natural gas prices fell by over one percentage point. The contraction in the spread indicates that the bearish sentiments have fallen for natural gas. However, the contraction in the negative inventories spread might have kept a lid on prices.


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