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Natural Gas ETF Warms Ahead of Colder Winter


A cold winter bite has helped investors warm up to natural gas exchange traded funds on expectations that the industry’s stockpiles are starting to fall.

The United States Natural Gas Fund (UNG) was 0.6% higher Wednesday and increased 3.8% over the past week.

Natural gas futures were up 4.7% Tuesday and added another 1.0% Wednesday.

Beth Sewell, managing partner at Quantum Power & Gas Services, said that the colder than average weather in the mid-continent and Eastern U.S. raised demand for natural gas, MarketWatch reports.

Meanwhile, heavy maintenance at nuclear power plants also forced natural gas powered utilities to pick up the slack, reports David Bird for the Wall Street Journal.

In the mid-Atlantic, “Nuclear outages compensated for hurricane Sandy-related demand destruction,” Kent Bayazitoglu, an analyst at Gelber & Associates, said in the WSJ article.

On Thursday, the U.S. Energy Information Administration will release its reports on natural gas stockpiles, which Donald Murry, an economist at C.H. Guernsey & Co., believes could fall by 15 billion cubic feet to 3.914 trillion, reports Christine Buurma for Bloomberg.

“A withdrawal from inventories would tell the market that winter is already here,” Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC, said in the Bloomberg article. “We’re obviously seeing colder weather than what people remember from the latter part of last year.”

Commodity Weather Group LLC anticipates colder than normal weather across most of the eastern half of the U.S. Weather Derivatives calculates heating demand will be 20% above normal across the south-central U.S. According to the Energy Department, around 50% of U.S. homes use gas for heating.

“However it plays out, we are still seeing more blocking and cold air transport potential than what we saw last year at this time, which suggests continued significant year-on-year demand gains,” Matt Rogers, president of Commodity Weather Group, said in a forecast note.

United States Natural Gas Fund

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Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.