Natural Gas ETF Cooling Off on Inventories, Weather

November 29th at 3:10pm by Tom Lydon

Natural gas exchange traded funds strengthened late summer on electricity demand amid the sweltering heat, but it now looks like the warmer weather could persist and dampen demand for heat over winter.

The United States Natural Gas Fund (NYSEArca: UNG) was down 3.7% Thursday. The fund has gained 22.8% over the past three months. [Natural Gas ETF at 2012 High]

During earlier trading, natural gas futures dipped 4% to $3.650 per million British thermal units after the Energy Information Administration announced that natural gas stockpiles increased by four billion cubic feet last week to 3,877 bcf, reports Dan Strumpt for the Wall Street  Journal. Historically, natural gas stockpiles have declined this time of the year.

The milder weather has diminished demand for gas-fired heaters – about half of all U.S. homes use natural gas as a heating source.

“Further out it gets less mild…but there isn’t any bracing cold to rally behind,” said Aaron Calder, analyst at Gelber & Associates in Houston.

MDA EarthSat is projecting temperatures “much above” the normal range for this time of the year over the next six to ten days. While its 11 to 15 day outlook shows lower temperatures, the Northeast could still see above-normal temperatures.

“We’re seeing some bloodletting here, but we were already headed lower on the warmer-weather outlooks,” said Matt Smith, analyst at Schneider Electric, said in the article. “The combination of these two things is just hitting natty.”

United States Natural Gas Fund

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Max Chen 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.

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