The overextended supply of natural gas is weighing on the price and sentiment of drillers in the United States, leaving it to be anyone’s guess which way its related exchange traded funds (ETFs) are going to go.

As the prices to burn natural gas are falling, coal burners are seeing margins squeezed. One might think that independent power producers would be benefiting, but the falling prices are reducing input costs.

Liam Denning for The Wall Street Journal reports that if prices stay within a stable range, it could open the door to more deregulation, which would help these producers expand as they were set up to do.

Liam Denning for The Wall Street Journal reports that gas demand  could be favored by a Senate version of a bill to cap greenhouse-gas emissions. Natural gas emits roughly half the amount of carbon dioxide that coal does.

It should be noted that investors should not bank on the Senate to underpin natural-gas demand and prices in the medium-term. Watch the trend lines for signals as to what’s happening in the natural gas funds.

• United States Natural Gas (NYSRArca: UNG): down 50.8% year-to-date

• First Trust ISE-Revere Natural Gas (NYSEArca: FCG): up 34.7% year-to-date

For more stories about natural gas, visit our natural gas category.

Tags: Commodity ETFs, Energy, FCG, Natural Gas, UNG