Natural Gas ETF Tumbles 4% on Warmer Weather Forecasts

ETF Trends

U.S. Natural Gas Fund (UNG) fell 4% in the first hour of U.S. trading Monday on predictions weather in the U.S. will heat up and curb demand for the commodity.

Natural gas futures dropped to a two-week low on revised forecasts for mild mid-February weather, Bloomberg News reports.

Weather Group LLC forecasts above-normal temperatures in the eastern half of the U.S. from Feb. 7 through Feb. 11.

“The revised forecasts came in warmer and that’s putting some pressure on the market,” said Tom Doremus, an analyst at Tradition Energy in Stamford, in the report. “We’re seeing some near-term relief from last week’s cold.”

UNG, the natural gas ETF, was down for the third straight session after encountering resistance at its 50-day moving average.

“Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts on winter heating demand,” Investing.com reported. “The heating season from November through March is the peak demand period for U.S. gas consumption. Nearly 50% of all U.S. households use gas for heating. Still-high inventory-levels also weighed on prices.”

Traders have been selling natural-gas futures on the expectation that “the coldest part of winter is behind us,” said Tom Saal, a broker at INTL Hencorp Futures, in a Dow Jones Newswires report. “Historically, this is the time of season where you have the coldest weather.”

Leveraged natural gas ETFs also fell sharply on Monday. VelocityShares 3x Long Natural Gas ETN (UGAZ) declined 12%, ProShares Ultra DJ-UBS Natural Gas (BOIL) slipped 8% and Direxion Daily Natural Gas Related Bull 3x Shares (GASL) fell about 6%.

U.S. Natural Gas Fund

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The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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