Natural Gas and ETFs Are Subject to Weather’s Whims

July 17th at 1:00pm by Tom Lydon

The natural gas industry is gearing up for a spike in prices that could benefit the line of exchange traded funds (ETFs) for the commodity.

Break out the blankets. Some experts are predicting that customers could very well pay as much as 40% more than last year when the winter cold rolls in, reports Mitchell Hartman for Marketplace.

Oil has gotten more expensive, as you may have noticed, and industries that are able to do so have been switching to natural gas as an alternative. Those industries are grabbing what they can.

In trading today, however, natural gas futures fell more than 7% after a report that supples rose more than forecasts, reports Mark Shenk for Bloomberg. However, there is still less than there was a year ago.

The one ray of hope in rising prices, however, is one expert’s suggestion that the price of crude oil could ease up by then, too.

A bit of relief could come from projections of a slightly warmer-than-normal winter, as well, according to the Natural Gas Supply Association (NSGA). However, the forecasts state that this winter will be cooler than the previous two warm winters. Hurricane experts are also forecasting moderate levels of activity, which could pressure the market.

In one year, the average household in the United States uses 84,000 cubic feet of natural gas. However, residential use only accounts for 22%. Industrial is 32% and electric generators are 24%. The majority of natural gas comes from our own domestic supply.

Natural gas ETFs and exchange traded notes (ETNs) include:

  • First Trust ISE-Revere Natural Gas (FCG), up 24.7% year-to-date
  • United States Natural Gas (UNG), up 48% year-to-date
  • iPath DJ-AIG Natural Gas Total Return (GAZ), up 48.3% year-to-date

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.

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FCG UNG