Natural Gas Keeps Falling –Don’t Just Blame it on Oil

The price of United States Natural Gas (UNG) dropped below $20 last week and by 9% since the beginning of the month. The fall in oil prices may have weakened the natural gas market. But another key factor is the expectations for warmer than normal weather that could keep pressuring down UNG. Let’s see what is up next for UNG.

The price of UNG under-performed natural gas by nearly 3 percentage points over the past few weeks. This is due to roll decay related to the changes in the future markets.  These markets continue to be in Contango over the short term contracts (next month).

But over the coming months the future markets are in Backwardation – this means the prices are expected to come down by then as the winter conditions may subside by then. This could result in a fall in the demand for natural gas for heating purposes and pressure down UNG.

The rest of this analysis is at Seeking Alpha

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