Currently, the natural gas market is trading in a state of backwardation, bolstering natural gas ETF returns. The March contract is trading more than $1/mmBtu above contracts for April delivery. A futures market is said to be backwardated when near month contracts are more costly than later-dated contracts.
Natural gas futures-backed ETFs, like UNG, will benefit from a backwardated market as they roll front month contracts to avoid delivery, selling a contract that is about to expire at a profit and purchase the cheaper next month futures contract.
United States Natural Gas Fund
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