- Natural gas futures and commodity-related ETFs have been rallying since the start of March
- After touching a 17-year low on March 3, natural gas futures have rallied on bets that prices have fallen too low
- Moreover, some argue that natural gas demand for electricity generation could be even higher this summer
Natural gas futures and commodity-related exchange traded funds have been rallying since the start of the month as traders bet that the recent selling pressure will attract bargain hunters and trigger production cuts ahead of the summer heat.
Natural gas futures continued to gain momentum, rising for the seventh time in eight sessions. Nymex natural gas futures were up 1.0% Tuesday to $1.838 per million British thermal units, or 12.1% higher since its March 3 low.
Meanwhile, the United States Natural Gas Fund (NYSEArca: UNG) rose 2.0% and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) gained 0.4% On Tuesday. Since the March lows, UNG increased 10.5% and GAZ jumped 24.4%.
The three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) also 6.0% Tuesday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, advanced 2.7%.
After touching a 17-year low on March 3, natural gas futures have rallied on bets that prices have fallen too low, too quickly and on a turn toward hotter weather ahead in spring and summer when demand for cooling picks up, reports Timothy Puko for the Wall Street Journal.
“This market appears poised for a pause following the dramatic price decline,” Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates, told the WSJ.
Moreover, some argue that natural gas demand for electricity generation could be even higher this summer after more power producers shifted away from coal to burn much cheaper natural gas.
On the supply side, observers anticipate output to dip from near-record levels as the low prices force producers to shut down rigs and slow their work. The supply outlook is already diminishing as the number of working rigs has recently dropped to historic lows – Ritterbusch and others, though, have warned that the lower rig counts have yet to translate to lower production.
Total U.S. natural gas inventories were at almost 2.5 trillion cubic feet, or 58% higher year-over-year and 42% above averages for this time of the year.
United States Natural Gas Fund