Boston, MA, 02/27/2014 – United States Natural Gas Fund, LP (NYSEARCA:UNG) is running opposite to its underlying’s trend as it reports decline of more than 2% on Tuesday.
Weather Woes To Drive Natural Gas Higher
The National Weather Service has issued another alert that the U.S. will get to experience another term of polar vertex this weekend. And, so the short spell of spring is likely to be again blanketed by the cold blast across the regions of the Central and Eastern U.S. Like every other time, the natural gas prices have also touched a record high of the last 5 years as it moved above $6 per MBtu. The higher prices of the natural gases comes in light of the increased demand of fuel during the harsh winter days.
Moreover, if the supplies of the natural gas is to be considered than the gross natural gas production grew by 1.5% in the last week; which is also higher by 2.5% than the production level last year. However, natural gas imports from Canada plummeted by 15.9% week over week. Therefore, briefly, the total U.S. natural gas supply went down by 0.3% in comparison to the previous week. So, if the supply continues to fall and the demand elevates, as the weatherman predicts , than the natural gas prices will remain higher for the forthcoming days.
ETF Behaving Contrary
So while natural gas is witnessing a sharp rise, the United States Natural Gas Fund, LP (NYSEARCA:UNG)’s attached to this commodity are driving down. United States Natural Gas Fund, LP, the largest of all has observed a 36% of assets wash out just this year, which translates to $366 million. The same trend is followed by Unites States 12-MOnth Natural Gas FUnd (UNL) which saw nearly $8 million drained out of its $23 million. According to John Hyland, CIO of the issuer of the fund said that this behavior is typical for the funds, which saw sell pressure when the underlying commodity is touching highs.
And, just the opposite is true for the funds which will benefit with the natural gas price fall. TheVelocityShares 3X Inverse Natural Gas ETN Fund (DGAZ), which will increase in case of fall in prices of natural gas witnessed $449 milllion of investor’s money this year.