Natural Gas ETF

U.S. Natural Gas Fund (NYSEArca: UNG) was launched in April 2007 and has lost money in every calendar year since then as the commodity’s price has stayed depressed on a supply glut.

However, 2013 could finally be the year that UNG and other natural gas ETFs end the rut. UNG capped a two-day rally with a gain of more than 4% on Friday.

Natural gas exchange traded funds could be moving past their bottom after a four year bear market in gas. Still, supply side strength could keep natural gas futures from breaking out.

On Wednesday, the Energy Department stated that weekly average output jumped to 7 million barrels a day in the week ended Jan. 4, a 20-year high and 1.16 million higher for the same week last year, reports Asjylyn Loder for Bloomberg.

Nevertheless, the long-term natural gas trend has been bearish, and more observers believe in a turnaround.

“We are hearing from various classes of investors that they are considering re-weighting gas in their portfolio allocation mix because 2012 may indeed have marked a price bottom,” Sal Gilbertie, president and co-founder of Teucrium, said in an interview.

According to the U.S. Energy Information Administration, the average price of natural gas is projected to rise almost a dollar in 2013 to $3.74 per million British thermal units, compared to the $2.75 average last year, reports Eric Schwartzel for Pipeline. Natural gas futures were trading at around $3.11/MMBtu Wednesday.

Gilbertie points out that the Baker Huges dry gas – wells dedicated to natural gas exploration – rig count is at a 13-year low after the low natural gas prices forced drillers to cut back. Moreover, Marcellus Shale Drillers have also cut costs and disassembled rigs due to the record low prices. [Natural Gas ETF Falls Below 200-Day Trend for First Time in Three Months]