Natural Gas ETFs Soar on Inventory Data - ETF News And Commentary
March 15 2013 - 5:30AM
Zacks
Yesterday, natural gas showed a huge run-up in its prices,
surging 3% in a single trading session. This stellar performance
was primarily driven by healthy inventory data reported by the
Energy Information Administration (EIA).
According to the EIA, natural gas in storage dropped 145 billion
cubic feet last week to 1.938 trillion, the lowest level since May
13, 2011. While this number is 18.5% below the year-ago level, it
is still 11% above the five-year average.
This data has also given natural gas ETFs a boost. The
E-TRACS Natural Gas Futures Contango ETN (GASZ),
which tracks the ISE Natural Gas Futures Spread Index, was the top
performer in the natural gas space, gaining 5.33% (read: Natural
Gas ETF Premium Collapses).
The fund takes short positions in the near-term futures
contracts and long positions in the mid-term futures contracts. As
mid-term futures contracts are priced higher than the near-term
futures contracts, the fund capitalizes on the price differences
due to an upward sloping futures curve.
The second winner in the space was iPath Dow Jones-UBS
Natural Gas ETN (GAZ) which added 4.89% yesterday. The
fund tracks the Dow Jones-UBS Natural Gas Total Return Sub-Index
and delivers returns through an unleveraged investment in the
futures contracts on physical commodities comprising the index plus
the rate of interest on specified T-Bills. (Though we should
note it is currently seeing a big premium over NAV and thus may not
be suitable for all investors)
Apart from these two, the ultra-popular United States
Natural Gas Fund (UNG) also experienced price increases,
adding 3.85% in a single trading day.
This product looks to track the changes in the percentage terms
of the price of natural gas futures contracts that are traded on
NYMEX that is the near month to expire, less UNG’s expenses, except
when the near month is within two weeks of expiration. In that
case, the next month’s contract will be used instead.
These ETFs are also performing well since the beginning of this
year thanks to the increased gas usage for heating in winter.
Further, the forecast for low temperatures to continue across most
parts of the U.S. will boost prices at least through the end of
March (read: The Comprehensive Guide to Natural Gas
ETFs).
On a year-to-date look, GASZ and GAZ have returned 2.74% and
3.72%, respectively, and amassed $11.9 million and $41.7 million,
respectively, in their asset bases. UNG had easily beaten its
counterparts though, and is leading the natural gas sector with an
11.32% gain. The fund has an impressive AUM of over $1 billion and
is also the most widely traded (see more in the Zacks ETF
Center).
The other unleveraged natural gas ETFs – United States
12 Month Natural Gas Fund (UNL), iPath Seasonal
Natural Gas ETN (DCNG) and Teucrium Natural Gas
Fund (NAGS) are also up 2.60%, 2.09% and 1.33%,
respectively, year-to-date.
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IPATH-SE NA GAS (DCNG): ETF Research Reports
E-TRC NAT GAS (GASZ): ETF Research Reports
IPATH-DJ-A NGAS (GAZ): ETF Research Reports
TEUCRM-NAT GAS (NAGS): ETF Research Reports
US-NATRL GAS FD (UNG): ETF Research Reports
US-12M NATL GAS (UNL): ETF Research Reports
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