Natural Gas ETF Surges as Tight Supplies Push Prices to 14-Year High

Natural gas-related exchange traded funds surged on Monday, with natural gas prices hitting a 14-year high and extending gains into a fifth straight session, as global supply concerns and a late seasonal cold blast fueled the ongoing rally.

Among the best-performing non-leveraged ETFs of Monday, the United States Natural Gas Fund (NYSEArca: UNG) rose 6.7%. Meanwhile, Nymex natural gas futures were up 8.0% to around $7.88 per million British thermal units and hit their highest level since September 2008.

“With momentum firmly bullish and the market ill-equipped to handle any further bullish shocks, notable continued gains for natural gas remain likely this summer,” according to EBW Analytics, CNBC reports.

EBW Analytics also added that a “bullish weather shift” has sent the U.S. market into “overdrive.”

Natural gas prices have jumped as strong exports, notably to gas-starved Europe, and below-normal temperatures contributed to a tightening supplies.

“LNG exports have taken on more significance with geopolitics and demand from both power generation/ industrial usage are strong. The US role as an exporter continues to increase,” according to RBC.

U.S. natural-gas supplies are tight, “sitting 23.9% below where they were last year and 17.8% below the five-year average,” analysts at Sevens Report Research said in Monday’s newsletter, MarketWatch reports.

“Additionally, a geopolitical fear bid remains in the market and demand is expected to remain elevated leaving the path of least resistance decidedly higher with a medium-term upside target of $9.06,” the analysts added.

The late-season cold front that has swept across the U.S. is contributing to increased heating demand for natural gas.

Meanwhile, Russia’s invasion of Ukraine and the associated Western sanctions have further added to energy supply concerns.

“The impact of long-term undersupply continues to provide fundamental support to the market,” Robbie Fraser, global research and analytics manager at Schneider Electric, said a daily note. “The longer those conditions continue, the more it forces storage levels lower, in turn raising the floor for where prices can trade near-term.”

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