The High Volatility of UNG Continues

The high volatility in the natural gas market was reflected in the price of United States Natural Gas (UNG) that changed direction with an unclear trend in the past several days. The recent withdrawal from storage was 198 Bcf, which was slightly higher than expected. Despite the higher extraction from storage, the natural gas market is still expected to cool down in the subsequent weeks.

For now, the Contango in the future markets hasn’t had a significant adverse impact on the pricing of UNG relative to natural gas prices.

Let’s take a closer look at the developments in the natural gas market starting with production: Baker Hughes reported the rig count reached 257 rigs – another 11 rigs were cut from the count last week and 87 from last year. Albeit the preliminary data for the past couple of months suggest a decline in natural gas output – mostly due to freeze-offs, the EIA (opens pdf) still estimates that natural gas production will continue to rise and reached an annual average growth of 3.7 Bcf/ day in 2015, year over year.

The rest of this analysis is at Seeking Alpha

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