Trade War Threatens Natural Gas ETF Outlook

The natural gas market and related natural gas ETFs may fizzle if the U.S.-China trade war extends.

The United States Natural Gas Fund (NYSEArca: UNG) has gained 6.5% over the past month and rose 2.3% year-to-date as Nymex natural gas futures now trade at around $2.95 per million British thermal units.

However, the natural gas market could come under pressure as an escalating trade war could threaten foreign demand for U.S. natural gas in a period when an ongoing shale oil boom caused a surge in natgas supplies.

Some analysts argue that trade disputes could disrupt exports and slow new infrastructure expansions ahead, the Wall Street Journal reports.

In response to the latest round of U.S. tariffs, China proposed a 25% levy on liquefied natural gas, or LNG. Alternatively, China would get its gas fix from Australia, Qatar, Russia or its own domestic sources as the emerging Asian economy develops its own sources.

“China will look elsewhere in the world to source the commodities they need,” J. Alexander Blackman, senior executive at Standard Delta LLC, told the WSJ.