An unexpected natural gas withdrawal rate as a cold front moved across the East Coast stoked a rally in gas-related exchange traded funds Thursday.
On Thursday, the United States Natural Gas Fund (NYSEArca: UNG) rose 4.0% and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) gained 5.8% as Nymex natural gas futures increased 4.7% to $2.37 per million British thermal units.
Meanwhile, the three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) surged 13.2% Monday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, jumped 7.3%.
Natural gas futures rallied Thursday after the U.S. Energy Information Administration revealed natgas inventories diminished by a more-than-expected 117 billion cubic feet in the week ended January 1, reports Nicole Friedman for the Wall Street Journal.
Gas prices plunged into the start of the winter season as moderate weather conditions sapped heating demand and robust production added to the oversupply conditions. Stockpiles typically experience a drawdown in early winter as more consumers utilize natural gas for indoor heating. However, due to the strong El Nino weather phenomenon, mild temperatures helped inventories expand until late November.
Last Week, colder temperatures moved across the U.S., stoking heating demand.
“Finally we got a real winter scenario,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc, told the WSJ. “That had been something that was not showing up.”
Demand for natgas is expected to rise next week as cold polar air moves into the Midwest Saturday and spreads to the east and south Monday.
Nevertheless, natural gas prices remain depressed as inventories are still above their five-year average for this time of the year. Total stocks now stand at 3.643 trillion cubic feet, or up 535 billion cubic feet year-over-year and 464 bcf above the five-year average.
United States Natural Gas Fund
Max Chen contributed to this article.