“The first quarter of 2010 has not been kind to investors in the United States Natural Gas Fund (NYSE: UNG), which has seen shares repeatedly touch new lows as a medley of still weak demand, surging supplies, and–of course–contango in natural gas futures markets. The fund finished the first quarter down nearly 30%, with the majority of that loss coming last month (see How UNG Lost 20% In March). UNG’s steady slide has been attributable to a number of factors, but chief among these has been stubborn strength in key indicators of natural gas supply. When the Energy Department reported that gas in underground storage increased by 11 billion cubic feet for the week ended March 19, it signaled a premature end to the winter drawdown season, and sent natural gas prices plummeting in the process,” Michael Johnston Reports From ETF Database.

Johnston goes on to say, “Now it turns out the supply figures (which are a critical input into valuation models) may be a lot less accurate than once believed. “The Energy Information Administration, the statistical unit of the Energy Department, has uncovered a fundamental problem in the way it collects the data from producers across the country—it surveys only large producers and extrapolates its findings across the industry,” writes Carolyn Cui. “That means it doesn’t reflect swings in production from hundreds of smaller producers.” The EIA is planning to make significant changes to the way it collects and reports natural gas inventory levels, a move that could result in major downward revisions to key data points.”

“The discrepancies between reported inventory data and actual supplies arise primarily from an inability to accurately track increases or decreases in gas supply from smaller producers. Commodity analysts and gas producers have long suspected that the EIA has been overstating domestic natural gas output, a factor some believe has contributed to pushing gas prices to seven year lows. The impact of the changes in reporting system remain to be seen, but some believe the revisions will be material. Gary Long, the director of the monthly gas production data report, notes that some states will see “significant” revisions in production data,” Johnston Reports.

See The Full Article: HERE

Here are some details on the Natural Gas ETF (NYSE: UNG) below:

The United States Natural Gas Fund, LP (UNG) is a new way for investors and hedgers to manage their exposure to energy. The United States Natural Gas Fund LP (NYSE: UNG) is an exchange traded security that is designed to track in percentage terms the movements of natural gas prices. UNG issues units that may be purchased and sold on the NYSE Arca.

The investment objective of UNG is for the changes in percentage terms of the units’ net asset value to reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the price of the futures contract on natural gas traded on the New York Mercantile Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire, less UNG’s expenses.

Related posts:

1. Weekly Energy Roundup: Crude Surges, Natural Gas Continues Slide (UNG, USO, USL, UGA, BNO)
2. Energy M&A: The Natural Gas Bulls Are Back in Town
3. Beyond The U.S. Natural Gas Fund: 3 Intruiging ETFs To Play Natural Gas (GASZ, UNG, GAZ, NAGS, CHK, DVN)
4. Natural Gas Prices: Why It’s Time To Load Up On Natural Gas (UNG, FCG, DVN, CHK, GAZ)
5. ETF Deathwatch For December 2011: List Surges To 242 Names (SPY, DIA, IWM, VTI, QQQ)

UNG