UNG Could Resume Its Downward Trend

United States Natural Gas (UNG) started off the year with a modest gain of 1.5% (up to date). The larger than expected extraction from storage may have provided some back-wind for the recent gain in natural gas. But it’s too soon to imply the natural gas market is making a comeback with UNG still trading around $15. Let’s examine the recent developments in the natural gas market.

Despite the recent rally of UNG, it still trails behind natural gas: Over the last two months, UNG has under-performed natural gas price by roughly 1.5 percentage point.  This is due to roll decay.

Last week’s Energy Information Administration report showed that the withdrawal from storage was above market expectations: The extraction was 131 Bcf while market estimates were at 120 Bcf. Last week’s 5-year average extraction was 145 Bcf. So in any case, the recent withdrawal was lower than average.

Albeit the demand for natural gas grew by 15.7%, week over week, mainly due to higher demand in power and residential/commercial sectors. Alas, the demand was still lower than the same week last year by roughly 8.5%.  The supply remained higher by 8% compared to the same time last year – this is mostly due to higher production.

The rest of this analysis is at Seeking Alpha

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