Natural Gas Prices Surge 20% In 4 Weeks (UNG, GASZ, UGAZ)
Jared Cummans: Natural gas continues its bullish trend, as the fossil fuel looks to shake off the crushing losses that the last four years have brought. Thanks to the hottest summer in U.S. history and a spike in demand for this vital energy source, NG was able to rally for the better part of 2012, though it still remains negative for the year. But after many watched this commodity suffer a pullback in August, many thought it was heading to its old ways of consistent losses. Instead, NG turned it on in September and has been up roughly 20% in the trailing four week period [for more natural gas news and analysis subscribe to our free newsletter].
Though futures have slipped in recent days amid high supplies, the future for NG may still look bright. “Money managers boosted wagers on rising prices by the most since May 1, increasing net-long positions in four natural gas contracts by 82 percent in the seven days ended Oct. 2, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Friday” writes Bloomberg. “Electricity generators burned an average of 26.5 billion cubic feet of gas a day in September, up 16 percent from the same period a year earlier” the article continues.
Now, it seems that bullishness is slowly working its way back into this once-flailing commodity, as NG is on the cusp of turning positive for the year. It should also be noted that NG demand also spikes in the winter months as gas-powered heating appliances see a jump in use when the weather turns bitter. Analysts are awaiting colder weather on the horizon, and many are subsequently taking long positions to reflect that sentiment. Below, we outline three ETFs to help you keep up with the NG rally should it continue ahead.
- United States Natural Gas Fund (NYSEARCA:UNG): A great prospect for a short-term play. UNG is a massive trading instrument that has exchanged hands more than 10.8 million times per day over the trailing month. The fund is still down over 15% this year but has shot up nearly 40% in the last six months [see also The Rise and Demise of UNG].
- E-TRACS Natural Gas Futures Contango ETN (NYSEARCA:GASZ): This ETN shorts near term contracts while taking long positions in longer-dated maturities, allowing it to profit from contango. With expectations of rising NG, the commodity could fall into a contangoed pattern soon, so keep an eye on this fund.
- 3x Long Natural Gas ETN (NYSEARCA:UGAZ): A dangerous but potentially rewarding play, UGAZ goes long NG contracts with a 300% leverage. It is safe to say that this fund is not for the faint of heart, but it has also jumped 67% in the last month, making it an enticing investment.
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