Natural gas exchange traded funds (ETFs) have struggled in recent months, thanks to an embarrassment of riches for the fuel. Will a frigid winter be enough to bring prices back into balance?
A heat wave that swept the country this summer briefly caused prices to spike, but the demand wasn’t enough to keep them there. Reserves and production of the fuel are now back to where they were in the early ’70s, putting producers in a bit of a pickle , says Liam Denning for The Wall Sreet Journal.
Lower prices would ordinarily cause greater demand, which would eat up the reserves. The problem is that there are “use it or lose it” clauses on many land leases, which means producers have to keep doing what they do, or walk away and lose the money they’ve invested. [A Unique Way To Play Natural Gas.]
Other factors that indicate natural gas prices may stay down include:
- Chevron Corp. (NYSE: CVX) said it has made a “significant” natural-gas find offshore of Western Australia, as companies continue to discover gas in the region. Dow Jones NewsWire on The Wall Street Journal reports that the oil-and-gas company said Monday it discovered about 896 feet of net gas pay at a depth of nearly 3,000 feet in the Carnarvon Basin offshore.
- A major Brazilian oil and gas company, OGX Petroleo e Gas Participacoes SA, said recently that a recent natural gas discovery could hold as much as 15 trillion cubic feet of the clean-burning fuel. The Wall Street Journal reports that OGX estimates that this potential volume could correspond to a production capacity of approximately 15 million cubic feet of natural gas use per day. This abundance of gas could be enough to end Brazil’s dependence on Bolivia for the commodity. [Why Commodity ETFs Have A Leg Up On Down Days.]
According to the ETF Analyzer, there are 10 ways to get your natural gas fix, including the three funds below. Natural gas has had a rough time of it over the last three months, with non-leveraged or inverse ETFs trading down an average of 4.7%. Sign up for alerts to be notified when these ETFs cross their 200-day moving averages so you never miss a trading signal!
- First Trust ISE-Revere Natural Gas (NYSEArca: FCG): Holds the stock of natural gas producers
- United States Natural Gas (NYSEArca: UNG): Holds a basket of natural gas futures (read up on contango before you buy, though)
- SPDR S&P Oil & Gas Equipment & Services (NYSEArca: XES): Tracks a basket of oil and natural gas producers
Tisha Guerrero contributed to this article.
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.