Energy traders refer to natural gas futures as the “widow maker” because of the extreme volatility that can occur at any moment. Such radical moves in the oil and energy sector have been common in the past two months. The combination of back-to-back geopolitical and political news and winter storms sent prices soaring that blew short sellers out of the water. Natural gas is a fossil fuel, which is why it’s not renewable, but it burns cleaner than coal. Additionally, fuel cells can be used to generate cleaner electricity using chemical reaction instead of combustion.
Canceling the gas transportation agreement between Ukraine and Russia
Over the past five years, some European countries have received natural gas from Russia via pipelines that pass through Ukraine. The Ukrainian gas transit agreement with Russia’s Gazprom expired on January 1, 2025, with Ukraine choosing not to renew it because it did not want to help finance Russia’s war. This has led to a rise in natural gas prices at the end of December 2024. While Ukraine will lose $800 million in annual revenue, Russia will lose an estimated $5 billion. Most European countries have already found other ways to obtain natural gas. Natural gas prices rose by 22% on December 27, 2024, due to Ukraine not renewing the deal.
President Biden blocks 625 million acres of new drilling
As prices fell to the levels of the previous day, US President Biden announced a permanent ban on new drilling operations on approximately 625 million acres consisting of the East Coast, California, Washington State, Oregon, parts of Alaska, and the eastern Gulf of Mexico. . This sent natural gas prices soaring again, followed by a nationwide snowstorm that dropped an amount of snow not seen in a decade on the East Coast on January 6, 2025. The winter of 2025 is expected to be one of the coldest in nearly three years. Decades on the East Coast as the polar vortex moves south in the new year.
The year is still young. Here are two ETFs to trade the rise in natural gas prices.
US Natural Gas ETF
Natural Gas Fund in the United States Today
United States Natural Gas Fund
As of 01/17/2025 at 04:10 PM ET
- 52 week range
- $12.35
▼
$23.00
- Dividend yield
- 0.00%
- Assets under management
- $852.05 million
The standard exchange-traded fund (ETF) for measuring the movement or trading of natural gas prices is… United States Natural Gas Fund NYSEARCA: UNG European Training Foundation. This ETF is highly liquid, with an average trading volume of 12 million shares per day. It has $863.7 million in assets under management (AUM) with a market capitalization of $1.06 billion.
Its highest holding is 44.51% of natural gas futures contracts through Henry Hone Natural Gas January 25 contracts. The remainder are derivatives, money market funds, and holdings of cash and cash equivalents. UNG stock is up 47% in less than two months, but it’s still trading down 25.1% on a 12-month basis.
ProShares Ultra Bloomberg Natural Gas Fund
ProShares Ultra Bloomberg Natural Gas Today
BroShares Ultra Bloomberg Natural Gas
As of 01/17/2025 at 04:10 PM ET
- 52 week range
- $35.68
▼
$155.90
- Dividend yield
- 0.00%
- Assets under management
- $402.28 million
ProShares Ultra Bloomberg Natural Gas Fund NYSEARCA: boiling It is a double leveraged ETF for traders looking for more volatility. It is designed to reflect the doubling of one-day price movements for natural gas futures contracts.
For example, if natural gas futures rise 6% during the day, the boil price should rise 12% and vice versa on down days.
It’s worth noting that leveraged ETFs can inherently decline in value over time due to their daily pricing. This means that gaps up or down can affect pricing and erode the value of ETFs over time, even if natural gas prices are steady.
Contango and Decay: Trade them short term, don’t hold them long term
These ETFs can suffer from contango, where futures contracts are priced higher than the spot price, resulting in a negative return. This can lead to erosion and poor performance over time since both UNG and BOIL track commodity futures. Contango can impact BOIL more difficult since it is a 2x leveraged ETF. For this reason, it is not best to hold these ETFs for the long term, but rather trade them for the short term.
Before you consider a US natural gas fund, you’ll want to hear this.
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View the five stocks here
Are you looking to avoid the hassles of slander, volatility and uncertainty? You would have to be out of the market, which is not viable. So, where should investors put their money? Find out about this in this report.
