In terms of natural gas prices and futures, what’s the difference between UNG and UNL? UNL can help mitigate some of the impact of contango, which is when the front-month contract is higher priced than the contracts further out. By using the 12-month approach, the impact of contango is, on average, about two-thirds less than it would be in a fund that simply uses a front-month approach.
Which fund an investor chooses depends on what’s trying to be accomplished. When the markets are in contango, it’s no guarantee that a 12-month fund would do better. On the other hand, it could be beneficial for investors looking to lessen the impact contango can have. On the other hand, if someone is trading frequently and heavily, there might not be as much concern about contango. As the energy markets shift, it could be more advantageous to be in one fund over another – but it’s no guarantee in the volatile energy space. Many have learned that a single hurricane can change conditions rapidly.
Natural gas futures were wavering today. Below-normal temperatures in the Midwest and Northeast are anticipated to boost natural gas demand, but there’s only been modest growth in industrial production, reports Christine Buurma for Dow Jones Newswires. Until today, many traders had been betting that natural gas prices would fall in the coming months.
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