Thanks to some unseasonable temperatures, the outlook for natural gas was looking quite strong. The fuel tends to do well when temperatures are either too warm (spurring air conditioning demand) or too cold (boosting demand for heat), as both conditions prompt more electricity usage.
This was definitely the case across much of the country lately, as first temperatures were unseasonably warm, and then went a bit colder than normal more recently. However, the current outlook is calling for very mild temperatures, a situation which could slash demand for natural gas.
The supply demand balance could be further in jeopardy thanks to a lack of supply disruptions in the key Gulf of Mexico region. This area is responsible for a big chunk of natural gas output and is usually hit by hurricanes around this time of year. Yet, thanks to a total lack of storms so far, supply issues haven’t come into play at all so far in 2013, further adding to natural gas woes (read is This a Better ETF for Natural Gas ETF Investors?).
Due to this situation, natural gas futures faced extremely weak trading in Monday’s session, with front month futures tumbling by 3.7%. This pushed November futures down to $3.57/mm BTU, a loss of 14 cents, on a day when many other energy commodities were roaring higher.
“We have mild weather out on the horizon and heating demand is waning,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami in a Businessweek article. “The market is putting an ample amount of gas in storage for this time of year.”
ETFs in Focus
A slump in natural gas futures also led to rough trading for the natural gas ETFs as well. Easily the most popular in this respect is the United States Natural Gas Fund (NYSEARCA:UNG), a fund with nearly $1 billion in AUM.
This ultra popular fund lost about 3.9% on the day, on volume that was nearly twice as much as normal. The five day trend is now down 2.2%, while the product is down from a one month look as well, suggesting the longer term downward trend in the market is once again creeping into the picture.(...)Click here to continue reading the original ETFDailyNews.com article: Choppy Trading Ahead For Natural Gas ETFsYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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