Natural Gas ETF Losing Its Heat; Futures Dip Below $2 | ETF Trends

Unseasonably warm weather coupled with higher output from shale fracking operations have created a glut in U.S. natural gas, sending commodity futures and natural gas exchange traded funds on a steady decline. The trend is continuing, with natural gas prices hitting a new decade low as futures dipped below $2 Wednesday.

U.S. Natural Gas Fund (NYSEArca: UNG) was down 2.2% at last check Wednesday.

Natural gas prices have plunged 59% since its peak at $4.85 per 1,000 cubic feet last summer, reports Chris Kahn for the Associated Press.

On Wednesday, natural gas dropped to $1.999 per 1,000 cubic feet – prices have not been below $2 since January 28, 2002.

“There’s nothing that’s out there right now that can push this higher,” Scott Gettleman, an independent gas trader at the Nymex, said in a Wall Street Journal article.

Around half of Americans use natural gas to heat their homes during the winter months, but there was essentially no demand over the unseasonably warm winter, one of the mildest on record. [Warm Weather Saps Natural Gas ETFs]

Meanwhile, suppliers have not curtailed natural gas output, even in spite of falling prices, as production usually goes hand-in-hand with crude oil and other natural-gas liquid operations – liquids like ethane, propane and butane are used to produce plastics and other products.