Natural gas prices are falling, thanks to U.S. inventories being perched at their second-highest levels ever. What does this mean for exchange traded funds (ETFs)?

Forecasts for natural gas is down, or lowered, as the supply-and-demand ratio is well supplied and U.S. inventories have surged to the second-highest level ever. Worldwide, and in the United States, there is plenty of natural gas for consumers to use and consumption will lower by 1.3%, reports Tom Stundza for Purchasing.com.

Natural gas consumption normally climbs in the summer as cooling demand kicks in, but it might not be enough for a price recovery anytime soon because inventories are well above where they usually are at this time of year.

The outlook overall seems to be optimistic, though: 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.

Combined with oil and coal, natural gas will meet 79% of U.S. energy supply needs over the next two decades.

Meanwhile, in Russia, the world’s largest gas producer and the world’s largest natural gas market – the United States – have finally come together. Both Shell and Gazprom are working together to send gas from Russia’s far east to LNG terminals on the U.S. West Coast. Figures estimate that the Gazprom shipments might make up about 0.5% of U.S. gas demand, a small-scale relationship, reports Keith Johnson for The Wall Street Journal.

As the Obama administration’s energy policy hinges on reducing dependence on foreign energy, especially oil, eyebrows may raise. Importing natural gas raises the bar for the environment- it makes natural gas-fired power plants even more competitive with dirtier coal-fired plants. But it would also widen the cost advantage natural gas plants enjoy over renewable energy, such as wind power and solar power.

• United States Natural Gas (UNG): down 37.4% year-to-date

• Market Vectors Russia ETF (RSX): up 33.5% year-to-date; Gazprom is 7.6% of assets

Tags: Commodity ETFs, Eastern Europe, Emerging Markets, Energy, Global ETFs, Green ETFs, Natural Gas, Obama, RSX, Russia, Socially Responsible ETFs, UNG