Spring is quickly upon us, and natural gas exchange traded fund traders are already anticipating warmer weather and lower heating demand ahead.
On Monday, the United States Natural Gas Fund (NYSEArca: UNG) declined 6.8% and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) dropped 5.6%.
Nymex natural gas futures decreased 6.3% Monday to $2.15 per million British thermal units.
Meanwhile, inverse natural gas ETFs that capitalize off weakness in the commodity surged. For instance, the VelocityShares Daily 3x Inverse Natural Gas ETN (NYSEArca: DGAZ) seeks to provide the daily inverse 3x, or -300%, performance of the NYMEX natural gas futures. The ProShares UltraShort Bloomberg Natural Gas (NYSEArca: KOLD) provides the daily inverse 2x, or -200%, performance. On Monday, DGAZ jumped 20.4% and KOLD advanced 13.6%.
Natural gas prices took their biggest hit in a month on forecasts for mostly average or above-normal temperatures in central U.S. from February 11 through February 15, reports Christine Buurma for Bloomberg.
According to Thomson Reuters analytics, February is expected to be about 9% warmer than normal and March is expected to be 19% warmer than normal.
“Whatever hopes there were for cold weather to kick off February have dissipated,” John Kilduff, a partner at Again Capital LLC, told Bloomberg. “It’s a real worry at this point that we’re not going to get any more significant heating demand.”