How Low Can UNG Go?

The natural gas market cooled down last week, as the price of the Henry Hub fell by 4.5%. Moreover, the natural gas ETF United States Natural Gas (UNG) also tumbled down by 4.6%. Will UNG keep falling down? Let’s review the latest developments in the natural gas market that could impact the direction of UNG. Also, let’s start by examining the performance of UNG compared to natural gas prices.

In the past few weeks, UNG has slightly under-performed the price of natural gas. The chart below shows the normalized prices of UNG and natural gas (prices normalized to September 15th).

Based on the chart above, UNG has fallen by 1.5 percentage points below the Henry Hub. This is mostly due to the Contango in the natural gas market.

This could suggest if the futures markets remain in Contango, UNG will keep under-performing natural gas.

The rest of this analysis is at Seeking Alpha

 

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