Natural gas exchange traded funds (ETFs) have seen mixed performance over the last year, but they could be heading into a protracted downtrend if the producers of the fuel are on the money.
Producers have increased their bearish bets on the fuel to the highest levels in nearly three years. They join hedge funds, which have also forecast that the run is about to come to a grinding halt, says Asjylyn Loder at Bloomberg. That’s because there’s simply too much of it to go around.
If the forecasts come to pass, it will end a nice period for natural gas that saw its prices rise to the highest level since August.
Barclays feels that natural gas will likely remain around $4 this year, although a dip to $2 wouldn’t be shocking in the short-term. [Traders Bet On a Natural Gas ETF Comeback.]
Depending on your sentiment toward natural gas, there’s an ETF to play it:
- Direxion Daily Natural Gas Related 2x Bear (NYSEArca: FCGS) is designed to move 200% in the opposite direction of the ISE-Revere Natural Gas Index
- First Trust ISE-Revere Natural Gas (NYSEArca: FCG) owns natural gas producing companies
- United States Natural Gas (NYSEArca: UNG) and United States 12-Month Natural Gas (NYSEArca: UNL) both use futures contracts to get exposure to natural gas; UNG owns the front month, which tends to cause pain when natural gas is in contango, while UNL owns all 12 months, mitigating the effects of contango. [Drilling Bans Could Boost Natural Gas ETFs.]
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.