Though natural gas exchange traded funds (ETFs) are down today, the markets are betting that it won’t be the case for long.
Hedge funds and other large speculators raised their net-long positions, or wagers on rising prices, in four gas contracts by 94% in the seven days ended Jan. 4, reports Asjylyn Loder for Bloomberg. [Drilling Bans Could Boost Natural Gas ETFs.]
Why are they so bullish when funds like United States Natural Gas (NYSEArca: UNG) are down nearly 2% today?
Stockpiles of natural gas are down, and demand is rising, making the perfect equation for ETF investors this winter. More than 50% of this country’s homes use natural gas for their heat. Throw in forecasts for lower output, and it’s a recipe for a continued rise in prices.
If the cold weather does wane sooner than expected, natural gas may have a long advance ahead. [Cold Weather Heats Up Natural Gas ETFs.]
Aside from UNG, other ways to play natural gas include United States 12-Month Natural Gas (NYSEArca: UNL), which owns futures across the 12-month curve, and First Trust ISE-Revere Natural Gas (NYSEArca: FCG), which owns natural gas-producing companies.
If you’re feeling really bullish, check out Direxion Daily Natural Gas-Related Bull 2x Shares (NYSEArca: FCGL).
Tisha Guerrero 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.