Hint of Winter Cold Helps Warm Natural Gas ETFs

Natural gas prices and commodity-related exchange traded funds climbed Monday as colder temperature forecasts helped support demand outlook and triggered short-covering.

On Monday, the United States Natural Gas Fund (NYSEArca: UNG) gained 5.0% and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) rose 2.7% as natural gas futures jumped 5.6% to $2.765 per million British thermal units, its second-best daily gain in a month.

Meanwhile, traders capitalized on the turning sentiment with leveraged long ETFs. For instance, three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) advanced 10.7% Monday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, increased 7.1%.

While forecasts anticipate above-average temperatures to linger through the end of the month, Monday’s updates for the next week reveal areas of normal and below-normal temperatures across the East, reports Timothy Puko for the Wall Street Journal.

The colder forecasts help bolster the outlook for winter heating demand – about half of U.S. homes use natural gas for heat.


“It would really help if the weather was normal,” Scott Shelton, broker at ICAP PLC, said in a note.