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Cooling Demand to Push Natural Gas ETFs Higher

Natural gas, which showed weakness after the news of Freeport LNG’s extended outage emerged, seems to gain traction in the weeks ahead. The dual tailwinds of supply disruptions and cooling demand will act as major catalysts.

To tap this trend, investors could bet on natural gas ETFs that deal directly in the futures market. These are United States Natural Gas Fund UNG, United States 12 Month Natural Gas Fund UNL and iPath Bloomberg Natural Gas Subindex Total Return ETN GAZ. These funds have higher potential in the rising natural gas prices.

Temperatures are expected to rise later in July, potentially driving natural gas demand for air conditioning. An intense hot weather will spur cooling demand in homes and business, and ease pressure on storage injection levels, bolstering natural gas prices. According to NatGasWeather, weather data over the weekend held a “solidly hot and bullish pattern” between this coming weekend and July 24.

Additionally, a series of incidents involving midstream natural gas infrastructure threatened the supply chains for natural gas in an already tight-supply market (read: Natural Gas ETFs to Soar Further on Texas Fire).

Moreover, the uptick in price is fueled by surging demand for U.S. liquified natural gas. Soaring global gas prices are prompting buyers from around the world to continue purchasing all the liquefied natural gas that the United States is producing. An increase in LNG export demand will likely continue given higher demand in Asia and Europe.

United States Natural Gas Fund (UNG)

United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next month contract to expire. The natural gas contract is natural gas delivered at the Henry Hub, LA.

United States Natural Gas Fund has an AUM of $466.6 million and trades in a volume of around 7 million shares per day. UNG has 1.11% expense ratio (read: Top & Flop Zones of First-Half 2022 and Their ETF).

United States 12 Month Natural Gas Fund (UNL)

United States 12 Month Natural Gas Fund seeks to offer natural gas exposure without using a commodity futures account. The investment objective of UNL is to reflect the daily changes in the price of natural gas delivered at the Henry Hub. Its benchmark is the near-month futures contract to expire and the contracts for the following 11 months, for a total of 12 consecutive months. If the near-month futures contract is within two weeks of expiration, the benchmark will be the next-month contract to expire and the contracts for the following 11 consecutive months.

United States 12 Month Natural Gas Fund accumulated $37.5 million in its asset base and charges 90 bps as annual fees. The product trades in a moderate average daily volume of 113,000 shares.

iPath Bloomberg Natural Gas Subindex Total Return ETN (GAZ)

iPath Bloomberg Natural Gas Subindex Total Return ETN provides exposure to the Bloomberg Natural Gas Subindex Total Return, which consists of the contract in the Bloomberg Commodity Index Total Return that relates to natural gas (read: 5 ETFs Outperforming as Commodity Gauge Hits New High).

iPath Bloomberg Natural Gas Subindex Total Return ETN is unpopular and illiquid, with an AUM of $23.1 million and an average daily volume of 36,000 shares. Expense ratio comes in at 0.45%.


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iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZ): ETF Research Reports
 
United States 12 Month Natural Gas ETF (UNL): ETF Research Reports
 
United States Natural Gas ETF (UNG): ETF Research Reports
 
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