Normal Winter Conditions Could Pull Back UNG

The natural gas market experienced a high level of volatility that resulted in big swings for United States Natural Gas (UNG) in the past few days. The weakness in the oil market is weighing in on the natural gas, but the ongoing changes in the weather forecasts are keeping UNG changing course on daily level. Let’s see what’s next for UNG.

One of the main shifts was in the future markets, in which the market has changed in recent weeks from Contango to Backwardation, as presented in the chart below.

For now, the market is still in Contango over the near term and in Backwardation for the March and April contracts. If the market were to remain in Backwardation, this could suggest the price of UNG will outperform the price of natural gas.

In the recent EIA report, the extraction from storage was 51 Bcf; it was well below the 5 year average withdrawal of 72 Bcf and last year’s 81 Bcf. Following last week’s extraction, the underground natural gas storage reached 3,359 Bcf.

The rest of this analysis is at Seeking Alpha

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