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Oil Crash & Weather Concerns Boost Natural Gas ETFs
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Natural gas prices have been steady lately on dual tailwinds of oil crash and inclement weather. Oil prices fell to the floor to start the week due to weak demand caused by coronavirus-led lockdowns, still-ample supplies and most-importantly storage crisis. WTI crude oil ETF United States Oil Fund, LP (USO - Free Report) lost 39.4% in the past five days (as of Apr 23, 2020).
This led to the shutting-in of oil wells (due to low prices). But while doing the same, producers will also lose on some associated natural gas production. Lesser natural gas output caused the spurt in demand, per some analysts.
Then there is the forecast of inclement weather both on the east and the west coast. According to NatGasWeather for Apr 22 to Apr 28, “weak cool shots will continue across the Great Lakes and Northeast into next week with slightly chilly lows of 20s to lower 40s. The southern U.S. will be warm to very warm with highs of 70s and 80s, locally 90s… The nation’s hot spot will be the Southwest where highs will reach the 80s to 100s. Overall, moderate national demand” as quoted on fxempire.
Over the next seven days, U.S. power burn is projected to average about 28 Bcf/d, according to Platts Analytics. Per the U.S. Energy Information Administration (EIA) weekly natural gas storage report, supplies of natural gas increased by 43 billion cubic feet for the week ended Apr 17. The increase was lower than the average expectations of a rise of 49 billion cubic feet, per a survey of analysts conducted by S&P Global Platts.
The underlying Gasonline Price Index looks to reflect the changes of the price of gasoline, as measured by the price of the contract on unleaded gasoline for delivery to the New York harbor, traded on the NYMEX that is the near month to expire, except when the near contract is within two weeks of expiration, in which case it will be measured by the contract that is the next month contract to expire. The product charges 75 bps in fees. Th product gained 10.6% in the past two days (as of Apr 23, 2020).
iPath Series B Bloomberg Natural Gas Subindex Total Return ETN
The underlying Bloomberg Natural Gas Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts comprising the Index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The expense ratio of the ETN is 0.45%. The product lost only 0.7% in the past two days (read: Winning ETF Strategies to Counter Epic Oil Rout).
The equity part of the natural gas market has also been gaining at the aftermath of the oil crash. The underlying ISE-Revere Natural Gas Index is an equal-weighted index comprising exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas.EQT Corporation (12.59%), Cabot Oil & Gas Corporation (10.12%) and CNX Resources Corporation (4.92%) are the top three holdings of the fund. It yields 5.32% annually. The fund added 6.1% in the past two days.
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Oil Crash & Weather Concerns Boost Natural Gas ETFs
Natural gas prices have been steady lately on dual tailwinds of oil crash and inclement weather. Oil prices fell to the floor to start the week due to weak demand caused by coronavirus-led lockdowns, still-ample supplies and most-importantly storage crisis. WTI crude oil ETF United States Oil Fund, LP (USO - Free Report) lost 39.4% in the past five days (as of Apr 23, 2020).
This led to the shutting-in of oil wells (due to low prices). But while doing the same, producers will also lose on some associated natural gas production. Lesser natural gas output caused the spurt in demand, per some analysts.
Then there is the forecast of inclement weather both on the east and the west coast. According to NatGasWeather for Apr 22 to Apr 28, “weak cool shots will continue across the Great Lakes and Northeast into next week with slightly chilly lows of 20s to lower 40s. The southern U.S. will be warm to very warm with highs of 70s and 80s, locally 90s… The nation’s hot spot will be the Southwest where highs will reach the 80s to 100s. Overall, moderate national demand” as quoted on fxempire.
Over the next seven days, U.S. power burn is projected to average about 28 Bcf/d, according to Platts Analytics. Per the U.S. Energy Information Administration (EIA) weekly natural gas storage report, supplies of natural gas increased by 43 billion cubic feet for the week ended Apr 17. The increase was lower than the average expectations of a rise of 49 billion cubic feet, per a survey of analysts conducted by S&P Global Platts.
All these kept natural gas-related exchange-traded products charged up. Below we describe the same (read: 4 Energy ETF Areas Better Positioned Amid Negative Oil).
United States Gasoline Fund LP (UGA - Free Report)
The underlying Gasonline Price Index looks to reflect the changes of the price of gasoline, as measured by the price of the contract on unleaded gasoline for delivery to the New York harbor, traded on the NYMEX that is the near month to expire, except when the near contract is within two weeks of expiration, in which case it will be measured by the contract that is the next month contract to expire. The product charges 75 bps in fees. Th product gained 10.6% in the past two days (as of Apr 23, 2020).
iPath Series B Bloomberg Natural Gas Subindex Total Return ETN
The underlying Bloomberg Natural Gas Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts comprising the Index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The expense ratio of the ETN is 0.45%. The product lost only 0.7% in the past two days (read: Winning ETF Strategies to Counter Epic Oil Rout).
First Trust Natural Gas ETF (FCG - Free Report)
The equity part of the natural gas market has also been gaining at the aftermath of the oil crash. The underlying ISE-Revere Natural Gas Index is an equal-weighted index comprising exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas.EQT Corporation (12.59%), Cabot Oil & Gas Corporation (10.12%) and CNX Resources Corporation (4.92%) are the top three holdings of the fund. It yields 5.32% annually. The fund added 6.1% in the past two days.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>