Natural Gas ETFs Are Heating Up

Natural gas-related ETFs surged Monday, with gas prices nearing two-year highs, as traders bet on rising demand in response to cooler weather forecasts.

On Monday, the United States Natural Gas Fund (NYSEArca: UNG) gained 5.2% and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) rose 7.0% as natural gas futures jumped 5.7% to $3.631 per million British thermal units. Over the past month, UNG increased 16.2% and GAZ jumped 30.3%.

Traders also capitalized on the turning sentiment with leveraged long ETFs. For instance, three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) advanced 15.8% Monday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, rose 10.3%.

Natural gas prices have rallied for three weeks, touching a new high Monday, as new forecasts reveal below-average temperatures spreading across most of the country, reports Timothy Puko for the Wall Street Journal.

“Anytime traders saw a hint of cold in the forecast they got really excited,” Rick Margolin, analyst for Genscape, told the Star Tribune. “This November has been a complete dud. It was one of the warmest Novembers (in years). Without that cold, there was no demand, and gas storage filled up, so there was nowhere to put produced molecules other than to price them aggressively to get consumed.”

MDA Weather Services projects below-temperatures across the entire country, except for parts of the Southwest and Florida into the third week of December.

Around half of U.S. homes utilize natural gas for heat, driving up prices during the winter months when temperatures fall.