Look For The U.S. Natural Gas ETF (NYSE:UNG) To Be Very Active Over The Next Two Weeks
“The rash of higher-than-normal temperatures have prompted concerns of heat-related illnesses or even deaths, bringing back memories of a 1980 heat wave that killed more than 1,200 people along the East coast. The almost unbearable conditions have inhabitants of affected cities longing for a wave of storms to move through later this week and provide relief. But investors in the United States Natural Gas Fund (NYSE:UNG) are cheering news of the heat wave, and hoping the blistering temperatures hang around for a while,” Michael Johnston Reports From ETF Database.
As a result of the heat wave moving through the eastern part of the country, air conditioners in the entire region are running at full blast. That translates into a spike in power demand, which in turn increases the need for natural gas-fueled power plants. “Hot temperatures increase gas demand as mostly gas-fired power plants are called on to meet spikes in power demand caused by air conditioning usage,” writes Mark Peters. “Prolonged hot spells can make a dent in gas storage levels, which have been strong amid increased production from shale gas formations.”
Johnston goes on to say, “The United States Natural Gas Fund (NYSE:UNG) was surging on Tuesday, climbing more than 4.3% in late morning trading. (NYSE:UNG) utilizes a futures-based strategy to offer investors exposure to natural gas prices; the fund’s current holdings consist of August contracts. By investing primarily in near month futures contracts, (NYSE:UNG) offers investors exposure to natural gas; the fund exhibits a near-perfect correlation with spot prices. But it also has the potential to incur a material “roll yield” when it sells expiring contracts and purchases longer-dated futures each month, a factor that has historically caused UNG to lag the hypothetical return on spot natural gas prices.”
“After plummeting for most of 2009 and the first quarter of 2010, (NYSE:UNG) has staged an impressive rally in recent weeks, thanks to a combination of worries over an active hurricane season, a spike in temperatures, and strong demand from domestic factories. In addition to monitoring thermometers in New York and Philadelphia, gas investors have kept a careful eye on the Gulf of Mexico, where a low pressure area near the Yucatan Peninsula has a 30% chance of developing into a tropical cyclone before the end of the week. Because a significant portion of domestic natural gas supplies originate in the Gulf of Mexico, a storm in the region could result in a major supply disruption. Look for (NYSE:UNG) to be very active over the next two weeks; investors will be eagerly awaiting inventory reports due out this Thursday and next to evaluate the impact of the recent heat wave and a potential tropical storm on supplies,” Johnston Reports.
ETFs offer an easy way to play Natural Gas and there are many options available besides the most popular US Natural Gas ETF (NYSE:UNG). We have listed some other options for investors to look at and compare to one another below. Note that we have listed some industry related ETFs as well as direct Natural Gas exposure plays excluding any leveraged ETFs. You can also visit our U.S. Natural Gas ETF (NYSE:UNG) category for more insight.
United States Natural Gas Fund (NYSE:UNG)
The United States Natural Gas Fund, LP (NYSE: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.
United States 12 Month Natural Gas (NYSE:UNL)
The investment seeks to reflect the changes, net of expenses, of the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the average of the prices of 12 futures contracts on natural gas traded on the NYMEX. The fund will consist of the near month contact to expire and the contracts for the following eleven months, for a total of 12 consecutive months contracts, 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 and the contracts for the following eleven consecutive months.
iPath DJ-UBS Natural Gas TR Sub-Idx ETN (NYSE:GAZ)
The investment seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones-UBS Natural Gas Total Return Sub-Index. The note is designed to reflect the performance of natural gas. The index is composed of the Henry Hub Natural Gas futures contract traded on the New York Mercantile Exchange.
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.
iShares Dow Jones US Oil Equipment Index (NYSE:IEZ)
The investment seeks results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Oil Equipment & Services index. The fund generally invests at least 90% of assets in securities of the Underlying index and depositary receipts representing securities of the Underlying index. It may invest the remainder of assets in securities not included in the Underlying index but which BGFA believes will help the fund track Underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. It is nondiversified.
Jefferies | TR/J CRB Wildcatters Exploration & Production Equity ETF (NYSE:WCAT)
The investment seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters/Jefferies CRB Wildcatters Energy E&P Equity index. The fund normally invests at least 80% of total assets in the equity securities that comprise the underlying index and depositary receipts based on the securities in index. The index is designed to track the overall performance of a universe of listed U.S. and Canadian small and mid-capitalization companies engaged in the exploration and production of oil and natural gas. The fund is nondiversified.