Summer Shortfall Could Bolster Natural Gas ETFs | ETF Trends

After the the coldest winter in 32 years forced Americans to burn through almost 3 trillion cubic feet of natural gas, exchange traded funds that the commodity have retreated, but a summer shortfall could again propel these funds higher.

The United States Natural Gas Fund (NYSEArca: UNG) is still up 20.8% year-to-date after dipping 12.1% since its February 21 closing high. [Some Investors are Departing Nat Gas ETFs]

NYMEX natural gas futures are trading around $4.37 per million British thermal units after touching a five-year high of $6.493 on February 24.

Now that the weather is warming up and demand has diminished, natural gas observers are looking toward the summer injection period and next winter. U.S. storage will require about 3 trillion cubic feet of gas during the warm-weather months to cover winter demand, reports Naureen S. Malik for Bloomberg.

However, Bank of America Corp. and BNP Paribas SA project that stockpiles could total less than 3.5 trillion cubic feet by the end of October, or 300 billion short of last year’s high. Stockpiles have increased to about 3.832 trillion cubic feet on average by the end of October.

“We’re going to be in a tight situation,” Francisco Blanch, commodities research head at Bank of America, said in the article. “It will be pretty hard to build inventories to 3.5 trillion cubic feet by the end of the summer season.”

Natural gas inventories declined 2.92 trillion cubic feet from the end of October to 896 billion cubic feet as of March 21, the fastest pace of withdrawals for any U.S. heating season since 1995.