Natural gas exchange traded funds surged Thursday after an unexpectedly low inventory injection on improved demand for summer cooling and a dip in production.
On Thursday, the United States Natural Gas Fund (NYSEArca: UNG) increased 6.1% and iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) jumped 13.7%.
Natural gas futures gained 5.5% to $2.60 per million British thermal units.
Meanwhile, the three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) advanced 17.8% Thursday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, rose 11.0%.
Related: Natural Gas ETFs for a Sizzling Summer Outlook
The U.S. Energy Department revealed natural gas stockpiles only increased 65 billion cubic feet in the week ended June 3, compared to expectations for a 79 bcf gain, reports Christian Berthelsen for the Wall Street Journal.
Nevertheless, the lower-than-expected rise in gas storage is still 32.1% above average for this time of the year. Overall natural gas inventory levels are still near 3 trillion cubic feet. Unless strong summer heat fuels demand for electricity-powered cooling, stockpiles could test physical storage limits of 4.3 trillion cubic feet at the end of October.
Natural gas prices have been strengthening since May on expectations of strong demand for gas-fired electricity generation to meet higher air conditioning needs ahead of forecasted above-average temperatures for the summer.
[related_stories]Gas prices previously hit an 18-year low after tepid winter demand. Natgas also typically hits a seasonal low with spring’s mild temperatures before warmer weather raises demand in gas-fired electricity generation for air conditioning.
Meteorologists anticipate above-average temperatures across the Southwest to the Midwest in the next two weeks, with higher-than-expected normal temperatures over the Plains state.
Related: Natural Gas ETFs Heat Up on Warming Weather
“The warmth we saw has triggered [air conditioning]loads,” Gene McGillian, senior analyst at brokerage Tradition Energy, told the Wall Street Journal. “The power sector is eating up the gas.”
Moreover, lower production, the switch from coal to gas-fired generation and rising exports are all supporting the natural gas market.
For more information on the natgas market, visit our natural gas category.
United States Natural Gas Fund