Looking ahead, producers will have to beat average storage additions by 20 to 35 bcf per week for six months to meet winter demand, according to Gelber & Associates. [Low Production Outlook is Supporting Natural Gas ETFs]
“People are worried about extreme weather in the summer and the winter and understand that because the storage is so low…there’s not much cushion to smooth out these weather events,” Aaron Calder, a senior market analyst at Gelber, said in the WSJ article. “People will have to pay through the nose if there’s a surge in demand.”
According to the CME Group data, the natural gas futures are currently trading in a slightly backwardated market – longer dated contracts are cheaper than near-term contracts. A futures-based commodity ETF, like UNG, would benefit if the underlying commodity is trading in backwardation. Since ETFs have to roll futures before maturity to avoid physical delivery of the commodity, a fund gains a profit every time it rolls to a cheaper later-dated futures contract in a backwardated market.
United States Natural Gas Fund
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