Natural gas-related exchange traded funds could begin to heat up as colder weather forecasts help fuel heating demand.
The United States Natural Gas Fund (NYSEArca: UNG) has declined 35.8% over the past three months but was still up 41.7% over 2021. Meanwhile, Nymex natural gas futures are now hovering around $4.06 per million British thermal units, and prices spiked above $6 earlier in the year.
Natural gas futures could begin to rebound as a colder temperature outlook across the U.S. could cause more homes to turn up the heat. The Weather Prediction Center forecasted heavy snow, freezing temperatures, and strong winds in the northern and western parts of the country, the Wall Street Journal reports.
“The colder weather coming to the U.S. will be watched and we should see a substantial pick up in heating demand next week,” BOK Financial analysts write in a note.
Refinitiv is predicting that average U.S. gas demand, including exports, could surge to 126.7 billion cubic feet per day, up from 110 billion.
Nevertheless, many traders have been betting on a drop in gas prices. The number of short bets among hedge funds and other speculators continues to outnumber bullish long views on rising prices by a wide margin, according to Commodity Futures Trading Commission data.
The pressure on the natural gas markets may be attributed to an uptick in domestic gas production and unseasonably warm fall and winter weather conditions that delayed the normal heating season across the country.
Natural gas prices even declined last week after the U.S. Energy Information Administration storage report revealed a weekly drop of 55 billion cubic feet, compared to the 57 billion forecasted among analysts surveyed by The Wall Street Journal, helping to drive gas storage into a small surplus.
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