Natural Gas ETFs Jump on Supply Disruptions, Cooling Demand Ahead | ETF Trends

Natural gas prices and related exchange traded funds climbed Monday as the summer heat could fuel electricity demand and pipeline problems impede supplies.

The United States Natural Gas Fund (UNG) rose 5.3% on Monday. Meanwhile, Nymex natural gas futures were up 7.2% to $6.47 per million British thermal units.

EBW Analytics Group senior analyst Eli Rubin highlighted a combination of rising temperature expectations later in July and potential supply risks “hinted at” after a series of incidents involving midstream natural gas infrastructure, the Natural Gas Intelligence reported.

Energy Transfer LP stopped 0.2 Bcf/d of capacity over the Old Ocean Pipeline system following a fire. Additionally, in the latest incident, a fire was reported at a Oneok natural gas liquids processing plant in Oklahoma.

“In our view, any supply losses are likely to be relatively small on a national basis,” Rubin said.

“Natural gas has struggled to climb above the mid-$6.00 range since news of Freeport LNG’s extended outage, while technical analysis warns of notable downside price risks,” Rubin added. “Still, strengthening cooling demand in the back half of July… may sustain a tight physical market over the central U.S. and be a significant driver of near-to-medium term upside risk.”

The weather conditions could turn hotter, fueling natural gas for electricity generation as Americans turn up the air conditioning.

Weather data over the weekend held a “solidly hot and bullish pattern” in the upcoming period for this coming weekend and July 24, according to NatGasWeather.

This will bring “widespread highs of 90s and 100s for strong to very strong national demand,” according to the weather service provider. “The pattern might have trended too hot for this period, especially since there’s potential for tropical showers to find ways into the southern U.S. with cooling in time.”

“But for now, the natural gas markets will view the weather patterns as solidly bullish. How production trends and the natural gas plant explosion in Oklahoma impact prices are lesser knowns.”

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