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Natural Gas ETFs Warm Up to Winter Chills

Sanghamitra Saha

Like in most winters, natural gas prices started receiving warmth from the chills this year. Normally, the Arctic blast of cold air gives life to this commodity every winter. The cold snap boosts electricity demand across the region, putting focus on natural gas.

This year as well, forecasts of colder-than-expected temperatures in the United States might drive natural gas prices. Per Zerohedge.com, “an Arctic blast of cold air is likely to roll into the Mid-Atlantic and Northeast regions this coming week, possibly producing one of the first snowmaking weather events of the year by late week.”

Already, natural gas prices have scaled to the highest level since March. Notably, natural gas prices have suffered this year with United States Natural Gas Fund LP UNG losing 9.1% in the year-to-date frame. The fund lost 23% in the past year (as of Nov 4, 2019).

Hedge funds and other speculative investors, who previously had a bearish call on natural gas, have now started taking interest in the commodity. Thus, analysts are of the opinion that a recent reversal of those bearish bets can drive bullish price movements such as the current one.

Per EIA, natural gas inventory was 1.4% higher than the five-year average and 17.8% higher than the year-ago level. However, according to Genscape Inc., the upcoming week’s EIA number is likely to be the last reported injection of the season. After that, we are likely to see drawdowns in inventory.

Below we highlight a few ETFs that are poised to benefit from the recent spike in natural gas prices.

ETFs in Focus

An ETF tracking natural gas futures, namely, United States Natural Gas Fund UNG added about 4.3% in the past five days (as of Nov 4). Investors can also take a look at United States 12 Month Natural Gas UNL, which added 3.3% in the past five days and leveraged natural gas ETF ProShares Ultra Bloomberg Natural Gas BOIL tacked on 7.4% gains (see all energy ETFs here).

For those who are doubtful of the risky futures contracts, it is worth noting that there is an equity play out there that targets the broad natural gas market in ETF form. The fund is First Trust ISE Revere Natural Gas Index Fund FCG, which holds about 40 stocks in its basket and charges investors 60 basis points a year in fees (read: Best Leveraged ETF Areas of Last Week).

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First Trust Natural Gas ETF (FCG): ETF Research Reports
 
ProShares Ultra Bloomberg Natural Gas (BOIL): ETF Research Reports
 
United States 12 Month Natural Gas Fund, LP (UNL): ETF Research Reports
 
United States Natural Gas Fund, LP (UNG): ETF Research Reports
 
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