Mother Nature Could Provide Much Needed Relief For These Oil and Natural Gas ETFs (UNG, FCG, USL, XES)
“The 2010 Atlantic hurricane season officially starts on June 1. But smart traders are already gearing up. The Gulf of Mexico is responsible for 13% of the U.S. natural gas production (and 30% of its domestic crude oil production). A strong hurricane — or two — hitting in the wrong place could knock some of that production offline. And just the possibility of that happening could put a bid into energy prices when and if the first hurricanes form off the coast of Africa. The real threat is hurricane season, which can force the shutting down (or “shut in”) of gas and oil rigs all across energy alley in the Gulf of Mexico. And this year’s hurricane season has the potential to be a doozy,” Sean Brodrick Reports From Uncommon Wisdom Daily.
Brodrick goes on to say that the, “Weather forecasters are already calling for a strong season. The highly respected hurricane forecasting team at Colorado State predicts 15 named storms this year. AccuWeather expects 16 to 18 named storms. And private forecasting company WSI expects seven to nine storms, but that is up from its earlier forecast. The long-term (1950-2000) average is 9.6 named storms, and the short-term (2000-2009) average is 15 named storms. I’m expecting traders and investors to worry that a busy hurricane season will impact natural gas production and therefore send prices higher. The same thing could happen with crude oil.
“You could play a potential hurricane-fueled move in energy prices with exchange-traded funds. Here is an idea … The United States 12-Month Oil Fund (NYSE:USL) aims to track the price of oil. Like other oil ETFs, it does an imperfect job. The USL has clocked a 10% gain in the last year, which is half the gain made by crude oil at the same time. A better bet might be the SPDR S&P Oil & Gas Equipment & Services ETF (NYSE:XES), which has tracked oil more closely. Take a look at this chart below and you’ll see what I mean … As for natural gas, you can track it with the United States Natural Gas Fund (NYSE:UNG) or the First Trust ISE Revere Natural Gas ETF (NYSE:FCG), which holds a basket of natural gas drillers and producers. But be careful. Energy prices could spike quickly, then be gone with the wind as the first hurricane rounds the Florida peninsula into the Gulf,” Brodrick Reports.
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We have put together some more details on the ETFs mentioned in the article below:
United States 12 Month Oil ETF (NYSE:USL)
The investment seeks to replicate the changes in percentage terms of the price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the average of the prices of 12 futures contracts on crude oil traded on the NYMEX. The fund will consist of the near month contract to expire and the contracts for the following eleven months, for a total of 12 consecutive months’ contracts. When calculating the daily movement of the average price of the 12 contracts each contract month will be equally weighted.
| TOP 10 HOLDINGS ( 74.12% OF TOTAL ASSETS) |
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SPDR S&P Oil & Gas Equipment & Services ETF (NYSE:XES)
The SPDR® S&P® Oil & Gas Equipment & Services ETF seeks to replicate as closely as possible, before expenses, the total return performance of the S&P Oil & Gas Equipment & Services Select Industry® Index (ticker:SPSIOSTR). Our approach is designed to produce portfolios with low portfolio turnover, accurate tracking, and lower costs.
| As of05/20/2010 | |||
| Name | Weight | Total Mkt Cap M | Shares Held |
| Superior Energy Svcs Inc | 4.94% | $ 1,709.05 | 617,004 |
| Dresser-Rand Group Inc | 4.67% | $ 2,460.25 | 425,789 |
| Exterran Hldgs Inc | 4.67% | $ 1,543.02 | 518,993 |
| Schlumberger Ltd | 4.55% | $ 70,638.15 | 208,531 |
| Smith Intl Inc | 4.48% | $ 9,791.69 | 308,756 |
| Fmc Technologies Inc | 4.42% | $ 6,737.41 | 216,422 |
| Seacor Holdings Inc | 4.38% | $ 1,600.21 | 167,526 |
| Tidewater Inc | 4.37% | $ 2,226.51 | 276,803 |
| Oil Sts Intl Inc | 4.23% | $ 1,946.73 | 295,509 |
| Patterson Uti Energy Inc | 4.15% | $ 1,970.88 | 878,880 |
United States Natural Gas ETF (NYSE:UNG)
The United States Natural Gas Fund LP (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.
First Trust ISE-Revere Natural Gas Idx (NYSE:FCG)
The investment seeks to replicate, net of expenses, the ISE-REVERE Natural Gas index. The fund invests at least 90% of assets in common stocks that comprise the index. The index is an equal-weighted index that consists of exchange-listed companies that derive a substantial portion of their revenue from the exploration and production of natural gas. The fund is nondiversified.
| TOP 10 HOLDINGS ( 37.26% OF TOTAL ASSETS) |
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