The natural gas-related exchange traded fund (ETF) has hit a new low, trading downward as a result of rolling futures contracts. Pessimistic traders are dumping the commodity in favor of shorting natural gas.
United States Natural Gas (NYSEArca: UNG) has been trading lower and lower since the mid 2008 as the fund keeps getting hit by contango in its front month rolls, remarks John Spence for MarketWatch. The fund is down more than 20% so far this month, and it recently touched a new record low of $6.50 per share.
The Commodity Futures Trading Commission (CFTC) reported that large institutional investors are taking more money out of long positions than short positions, comments Claudia Assis for MarketWatch. The commodity ended on Friday at an 11-month low. [Natural Gas ETFs Hit By Supply Glut.]
Natural gas prices hit a low on Wednesday, dropping below $4 per million British thermal units, reports Mark Peters for The Wall Street Journal. Utilities have effectively shifted their energy concerns over to the cheap natural gas, which has dramatically decreased coal demand.
Consumer demand for electricity, and by extension natural gas, is likely to diminish over the coming weeks as the weather starts to cool. Total demand is still tied to the outlook of the U.S. economy. However, a hurricane hitting the gas producers in the Gulf of Mexico could drive prices higher. [An Unusual ETF to Play Natural Gas.]
For more information on natural gas, visit our natural gas category. According to the ETF Analyzer, nearly all natural gas ETFs have been in pain for the last three months. UNG is one of the hardest-hit, but also down in the time period are:
- First Trust ISE-Revere Natural Gas (NYSEArca: FCG), down 10%
- iShares Dow Jones U.S. Oil & Gas Exploration & Production (NYSEArca: IEO), down 8.6%
- United States 12-Month Natural Gas (NYSEArca: UNL), down 17.6%
- The Oklahoma ETF (NYSEArca: OOK), down 2.9%; energy names make up about 60% of the fund
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.