“Natural gas futures plunged Thursday after another above-average weekly storage build brought stockpiles closer to last year’s record levels.  Natural gas for November delivery fell 6.4%, or 24.8 cents, to $3.617 a million British thermal units on the New York Mercantile Exchange, the lowest ending price since September 2009. The benchmark contract is trading at its lowest levels for this point in the year since 2001,” The WSJ Reports.

As a result Eric Dutram from ETF Database noted  ”One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (NYSE:UNG), which tumbled by 6.5% on the day. These sharp losses came after supplies of natural gas grew more than expected in the past week, up to just under 3.5 trillion cubic feet. This 85 bcf gain was much higher than the 76 bcf that analysts had expected and extended the gap between the current inventory level and the five year average–now at 6.7%. ”

“We’re going to be in a very robust inventory environment heading into the winter,” said Chris Kostas, a senior analyst with Energy Security Analysis Inc. “Between the high heating demand over the past winter and strong cooling demand over the summer, it’s amazing that we’re only 4% below last year’s (inventory) record.”

The Natural Gas ETF (NYSE:UNG) also saw some unusual heavy options activity on the day as,  ”A total of 81,906 call and 31,385 put contracts were traded raising a three month record high call volume alert. Today’s traded Put/Call ratio is 0.38. There were 2.61 calls traded for each put contract,” Market Intellisearch Reports.

They go on to say, “The ratio skew implies that investors are hedging their positions in anticipation of a stock move. Today’s unusual volume activity confirms that traders are rebalancing their portfolios. Shares of United States Natural Gas edged down $0.41 (-6.63%) to $5.77. The stock closed at $6.18 in the previous trading session and opened today at $6.08. The price of the stock ranged between a low of $5.76 and $6.09 respectively. The trading volume of 58,201,936 is above the 90 day average volume of 19,712,500 shares. (NYSE:UNG) is trading below the 50 day moving average. The stock’s 52 week low is $5.88 and 52 week high is $12.20.”

With Natural Gas at an extremely low price of $3.617 a million British thermal unit, there seems to be much more upside than downside in the Natural Gas ETF (NYSE:UNG)?

MKM Partners said it best “With autumn upon us and colder weather on the way, along with the historical seasonal peak in natural gas, we believe that natural gas may be around its lower limit.” 

Take a look at our category on the ETF for more in-depth articles below:

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