Natural gas exchange-traded funds (ETFs) declined on Thursday despite the Midwest and Mid-Atlantic regions in the United States caught in historically-low temperatures due to a polar vortex.
The United States Natural Gas Fund (NYSEArca: UNG) declined 1.41 percent while the VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) fell 4.04 percent.
Meanwhile, electrical and gas systems across the Midwest and Mid-Atlantic will be tested as the cold weather continues. The Washington Post is reporting that certain areas in these regions are already experiencing power outages as the demand for gas and electricity rise.
“When the temperature gets this usually low,” Commonwealth Edison spokesman Paul Elsberg said, “we’re bound to see these types of outages.”
Received an update from @KarenEvansCESER on how @ENERGY is ready to respond to the polar vortex hitting the country from the Midwest to the East Coast. pic.twitter.com/d05XjfabSD
— Rick Perry (@SecretaryPerry) January 29, 2019
In December, natural gas ETFs were already declining due to weather forecasts pointing to mild conditions leading to below-average gas-weighted degree days through the end of the month, according to Natural Gas Intelligence reports.
Time to Go Long?
With the affected areas in the grips of the polar vortex, it might be time for investors to consider taking a closer look at natural gas. Investors should, however, consider the risks given the volatile swings associated with natural gas prices.
“In every column I have written about natural gas for Forbes I have referred to the natgas futures contract’s legendary status among energy traders,” wrote Jim Collins of Forbes. “Yes, as I have mentioned before, the natgas contract is known as “the widowmaker” owing to its extraordinary volatility.”
Speaking to the volatile nature of natural gas, UNG soared past its 200-day moving average in December before it fell below that level to begin 2019.