Exchange traded funds that track natural gas price movements are stuck in volatile back-and-forth trading and still remain one of the worst ETF sectors as wary investors weigh colder weather against the abundant supply.
U.S. Natural Gas Fund (NYSEArca: UNG) is down 17.5% year-to-date.
Weather experts forecast temperatures in the Northeast and Midwest to cool below normal levels later this week and continue into next week, reports Joe Silha for Reuters. However, most traders remain pessimistic and don’t believe that the late-winter weather can sustainably lower the inventory surplus.
“There has been some bargain buying and there is a little (cold) weather coming, but it’s February. Storage is still going to be problematic,” a New England-based trader said in the report.
This winter was the second mildest on record since 1950, slowing inventory withdrawals by 30% below the normal rate.
Nervous traders believe that diminishing demand could pressure prices below the 10-year low of $2.231 reached last week. Most analysts also project inventories to end this winter at 35% above the average levels, or near the all-time high for end-season storage set in 1983. [Is Natural Gas ETF Rally for Real?]