Natural gas prices and exchange traded funds are back under pressure after perking up somewhat in January.
Unfavorable fundamentals from both the demand and supply side are hurting natural gas and the ETFs.
U.S. Natural Gas Fund (NYSEArca: UNG) is down more than 20% year to date. After continually trading under $5 a share, the fund executed a 4-for-1 reverse split on February 22, 2012. [ETFs for Natural Gas]
The iPath Natural Gas Total Return ETN (NYSEArca: GAZ) is an exchange traded note that follows natural gas futures.
The U.S. Energy Information Administration announced in its weekly report that natural gas in storage dropped a lower-than-expected 82 billion cubic feet for the week ended Feb. 24, according to the Associated Press. Inventory levels remain 45% above the five-year average and 43% above last year’s levels.
“We’re starting out the month of March in the same fashion we’ve seen most of winter, which is not a lot of weather demand,” Tom Saal, senior vice president of energy trading at INTL Hencorp Futures, said in a Wall Street Journal article.
“The primary focus today is on a substantial warm pattern over much of the North American continent,” the Commodity Weather Group said in the article.
New “fracking” techniques in shale beds are also providing a boost in natural gas production in the U.S.
According to the EIA, natural gas extracted from shale beds accounts for 23% of U.S. production, reports Mason Inman for the National Geographic. The EIA estimates that shale production could double or triple over the next 25 years and calculates that shale will generate half of U.S. gas production by 2035.
United States Natural Gas Fund
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Max Chen contributed to this article.