The East Coast is finally expected to feel a colder winter, heating up natural gas-related exchange traded funds, with natgas futures posting their largest surge in almost two months after dipping toward 16-year lows.
On Monday, the United States Natural Gas Fund (NYSEArca: UNG) rose 6.2% and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) gained 13.0%. Over the past year, UNG declined 62.9% and GAZ decreased 75.5%.
Meanwhile, the three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) surged 17.8% Monday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, jumped 9.7%.
Nymex natural gas futures were 8.8% higher Monday, trading around $1.92 per million British thermal units. Natgas futures dipped to $1.755 mmBtu last week.
Natural gas was warming up Monday as a cold weather front moved across the East, raising speculation on heating demand, reports Timothy Puko for the Wall Street Journal. Almost half of U.S. homes utilize natural gas for heating.
Forecasts call for temperatures closer to normal for this time of year across the East and below normal in the Rockies through the end of December.
Consequently, the sudden turn in weather forecasts has forced bearish traders to close out positions, contributing to the sudden surge in futures. Since August, money managers have had almost two bearish positions on gas for every one bullish position.