4 Factors Affecting Natural Gas ETFs

Natural gas is a great alternative energy source, and the form of energy and its exchange traded funds (ETFs) are at seven-year lows. Could this mean an uptrend is in the offing?
What makes natural gas so attractive?  Gregory Davis for Investopedia states the following reasons:

• The outlook on natural gas seems optimistic. The U.S. Energy Information excepts natural gas consumption to fall 1.3% this year and rise 0.4% next year. Likewise, Henry Hub spot prices averaged $4.65/Mcf in February, are expected to hit $4.67/Mcf in 2009 and $5.87/Mcf in 2010.
• It is not a renewable form of energy, but offers the benefits of producing less sulfur, carbon and nitrogen than carbon or oil, offering a clean source of energy.
• It is susceptible to the demand shocks caused by hurricanes and a faster than expected recovery of the U.S. economy, which could lead to a surge in demand from industrials.
• Combined with oil and coal, natural gas will meet 79% of U.S. energy supply needs over the next two decades.

If you want to grab exposure to this relatively clean source of energy, wait for the uptrends to appear and take a look at the following ETFs:

• U.S. Natural Gas Fund ETF (UNG): down 22.5% year-to-date
  

• First Trust ISE-Revere Natural Gas ETF (FCG): down 8% year-to-date and has crossed its 50-day moving average

Kevin Grewal contributed to this article.