Natural gas futures spiked to a multi-year high on tight supply conditions and declining inventories. Notably,
United States Natural Gas Fund ( UNG Quick Quote UNG - Free Report) is up 143% this year. The commodity is poised to surge further as a fire broke out at a key U.S. export hub in Texas, putting further pressure on the already tight global supply.
Natural gas prices in the U.K. and continental Europe surged higher on Jun 9, as Texas cut off a vital supply channel for months. Investors could easily tap the soaring natural gas price with ETFs that deal directly in the futures market. These are
United States Natural Gas Fund ( UNG Quick Quote UNG - Free Report) , United States 12 Month Natural Gas Fund ( UNL Quick Quote UNL - Free Report) and iPath Bloomberg Natural Gas Subindex Total Return ETN ( GAZ Quick Quote GAZ - Free Report) .
A fire broke out on Wednesday at Freeport LNG's facility on Quintana Island near Houston, TX. Though it was quickly brought under control, Bloomberg cited a company spokesperson on Wednesday as saying that shipments from the terminal could be affected for three months, as quoted on Investing.com.
The natural gas space has been hot in any case as the conflict between Russia and Ukraine has sparked fears of global supply disruption in an already tight-supply market. Western countries have slapped severe sanctions against Russia over Ukraine. European buyers are striving to source alternatives to Russian pipeline gas, this in turn has boosted the demand for U.S. liquefied natural gas.
In fact, Russian superpower Gazprom has since discontinued supplies to a number of 'unfriendly' countries as they have refused to pay for their gas in rubles.
IEA expects the Henry Hub spot price to average $8.69 per million British thermal units (MMBtu) in 3Q22, up from an average of $8.13/MMBtu in May. Natural gas inventories are below the five-year average. There is a continued demand for U.S. liquefied natural gas exports and high demand for natural gas from the electric power sector, given the lack of opportunities for natural gas-to-coal switching.
Against this backdrop, below, we highlight natural gas ETFs in detail.
ETFs in Focus United States Natural Gas Fund ( UNG Quick Quote UNG - Free Report)
United States Natural Gas Fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near-month contract is within two weeks of expiration, the benchmark will be the next-month contract to expire. The natural gas contract is natural gas delivered at the Henry Hub, LA. It has 1.35% in expense ratio.
United States 12 Month Natural Gas Fund ( UNL Quick Quote UNL - Free Report)
United States 12 Month Natural Gas Fund seeks to offer natural gas exposure without using a commodity futures account. The investment objective of UNL is to reflect the daily changes in the price of natural gas delivered at the Henry Hub Louisiana.
Its benchmark is the near month futures contract to expire and the contracts for the following 11 months, for a total of 12 consecutive months. If the near-month futures contract is within two weeks of expiration, the benchmark will be the next-month contract to expire and the contracts for the following 11 consecutive months. United States 12 Month Natural Gas Fund charges 90 bps in annual fees.
iPath Bloomberg Natural Gas Subindex Total Return ETN ( GAZ Quick Quote GAZ - Free Report)
iPath Bloomberg Natural Gas Subindex Total Return ETN provides exposure to the Bloomberg Natural Gas Subindex Total Return, which consists of the contract in the Bloomberg Commodity Index Total Return that relates to natural gas. Expense ratio comes in at 0.45%.