The unusually temperate winter across the U.S. has sapped natural gas demand, dragging gas-related exchange traded funds to all-time lows and January-delivered futures contracts to a 17-year low.
The United States Natural Gas Fund (NYSEArca: UNG) was unchanged in mid-Tuesday after paring early morning losses, which drove the natural gas ETF to new lows. UNG plunged 58.2% over the past year. [Natural Gas ETFs at New Lows as Inventories Hit New Highs]
Meanwhile, ETF traders hedged against continued natural gas weakness with inverse ETFs. For instance, the VelocityShares Daily 3x Inverse Natural Gas ETN (NYSEArca: DGAZ) seeks to provide the daily inverse 3x, or -300%, performance of the NYMEX natural gas futures. The ProShares UltraShort Bloomberg Natural Gas (NYSEArca: KOLD) provides the daily inverse 2x, or -200%, performance. Over the past year, DGAZ surged 362.5% and KOLD jumped 228.8%.
The unseasonal warm weather has weighed on natural gas prices, with January-delivered futures contracts, which are usually among the most expensive months for natgas, trading at their most expensive in 17 years, reports Gregory Meyer for the Financial Times.
Nymex natural gas futures were hovering around $2.06 per million British thermal units Tuesday.
According to the World Meteorological Organization, 2015 is shaping up to be the warmest on record, with the El Nino weather phenomenon causing mild temperatures across the northern U.S.
“A lot of the weather guidance continued over the weekend and it showed we are probably going to move through December with record warmth,” Jacob Meisel, chief meteorologist at Bespoke Weather Services, told CNBC. “This next week looks like it will be the warmest. We definitely will be touching record warms across major population centers in the Midwest and Northeast. These are some of the biggest demand regions for natural gas.”