Natural gas futures and related exchange traded funds soared to a three-week high Monday as the commodity heated up on more frigid forecasts ahead and bearish traders scrambled to cover positions.
On Monday, the United States Natural Gas Fund (NYSEArca: UNG) rose 8.5% and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) gained 13.0%. Over the past year, UNG declined 50.7% and GAZ decreased 66.5%. [Natural Gas ETFs Heat Up as Winter Cold Sets In]
Meanwhile, the three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) surged 25.7% Monday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, jumped 15.6%.
Nymex natural gas futures were 9.2% higher Monday, trading around $2.22 per million British thermal units. Natgas futures dipped to $1.755 mmBtu mid-December and touched a 16-year intra-day low.
After an unusually warm start to the winter season, signs of colder temperatures are starting to move East, an important indicator for winter heating demand, reports Timothy Puko for the Wall Street Journal.
According to Commodity Weather Group, temperatures across the Midwest and East Coast will dip to seasonal levels January 2 through January 6.
Moreover, there are signs that gas producers are cutting back from record-high production – the number of working natural-gas rigs dipped to its lowest ever in 28 years of data, according to Baker Hughes.