UNG Is Down For December — Will Cold Weather Pull It Back Up?

The price of United States Natural Gas (UNG) took another fall in the past week to its lowest level in recent months. During the month the ETF lost 27% from its value. The ongoing low oil prices may have contributed to weakness of UNG, but the main issue will remain in changes in weather expectations. The level of underground storage is also likely to play a role in the progress of UNG. This was the case last week. Next week’s extraction is likely to also be lower than normal for the season.

As I pointed out in the past, the changes in the weather are likely to play a significant role in the changes in U.S. storage levels. Last week’s lower-than-expected withdrawal may have contributed to the drop in UNG on the day of the publication. I say this with caution because the linear correlation between the changes in UNG and storage tends to be low. Nonetheless, there are occasions when the market seems to react to this news, as seems to be the case last week.

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