Natural Gas ETFs Jump on Potential Shift in Weather Conditions | ETF Trends

Natural gas prices and related exchange traded funds jumped, Friday, bringing some relief to an extended eight week winter sell-off, as weather conditions hinted at a colder outlook toward the end of January.

The United States Natural Gas Fund (NYSEArca: UNG) was among the best performing non-leveraged ETFs, rising 2.5% on Friday, while the Nymex natural gas futures rose 2.0% to $2.21 per million British thermal units.

“The overall theme the last couple of days has remained consistent…which suggests that we are heading into a period where colder risks have a better chance to finally become reality,” according to Bespoke Weather Services. “Our target based on tropical forcing signals has been more into the final third of the month. This stood out in the overnight runs, as they went warmer quite notably in the six to 10 day period but did show the colder potential after that.”

While weather models continue to exhibit a bearish setup through mid-January, Bespoke Weather Services shifted its forecast colder for the Midwest and Northeast regions through the January 18-19 weekend, which would raise national heating demand to near-normal levels, Natural Gas Intelligence reports.

“The key question is whether or not we get what we’d define as a ‘material’ pattern shift, something that would keep demand up at least near normal for a sustainable period,” Bespoke chief meteorologist Brian Lovern said.

NatGasWeather also expected changes in the next few days, with colder trends still possible for January 16 to 21 based on the growing intensity over Canada. However, markets will have to wait to see if the cold can linger past January 20 to 21 since the weather data remains mixed.

Natural gas traders, though, may be loath to jump into the sudden shift as they have been burned before during this winter season.

“Time after time, as expected cooler weather drew closer, it disappeared. It would not be surprising if this pattern were to be repeated again now,” according to EBW Analytics Group.

For more information on the natgas market, visit our natural gas category.