Fundamentally, total supply of natural gas averaged around 91.1 Bcf/d, essentially unchanged for the week ended Oct 5. Meanwhile, daily consumption was up 0.9% to 78.2 Bcf on stronger power generation demand. The production of dry natural gas remained constant week over week.
U.S. consumption of natural gas tends to be in the range of 30-35% for winter, higher than in the spring and fall months, when temperatures are on the milder side.
“With natural gas storage levels so low, prices are sensitive to cold this early in the season,” said Jacob Meisel, Bespoke Weather Services chief weather analyst and added that prices could shoot up $4 this winter.
“Natural gas supplies are 17 percent below last year and the five-year average levels. Put in real numbers, that’s 600 Bcf below. It means we’re starting off the winter with a big hole in our supply,” said John Kilduff of Again Capital.
Per NetgasWeather, the coming weather pattern would increase inventory deficits versus the five-year average to more than 650 Bcf, and more likely toward 700 Bcf.
However, fundamentals of the industry remain on the stronger side with the preference for cleaner burning fuel globally. EIA expects global demand for the commodity to grow by 43% from 2015-2040 (see: High Flying Saudi Arabia ETF Plunges on Sanction Concerns).
The natural gas export space has hit a roadblock with China imposing 10% tariffs on U.S. liquefied gas starting Sep 24. This has curbed business for American LNG producers as increased prices make it less competitive in a thriving China market (read: U.S. Natural Gas Exports Hit by Tariffs: ETFs in Focus).
Below we highlight natural gas ETFs:
It tracks the natural gas futures. AUM is $347.2 million and expense ratio is 1.3%. The fund has returned 15.3% year to date.
It tracks the ISE-Revere Natural Gas Index. AUM is $129.5 million and expense ratio is 0.60%. It has lost 1.8% year to date. It has a Zacks ETF Rank #3 (Hold) and High risk outlook.
It tracks natural gas futures. AUM is $5.4 million and expense ratio is 0.90%. The fund has returned 8.2% year to date.
The United States Natural Gas Fund, LP (UNG) fell $0.20 (-0.75%) in premarket trading Monday. Year-to-date, UNG has gained 14.97%, versus a 3.93% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Zacks Research.