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The Weakness In The Natural Gas Market Persists

The recent recovery in the oil market didn't provide any back-wind for The United States Natural Gas ETF, LP (UNG) that kept coming down in the past week. The Energy Information Administration reported another lower-than-anticipated withdrawal from storage.

(Data Source: EIA, Google Finance)

The chart above presents the normalized prices of natural gas and UNG since the end of November 2014 till date - over this time frame, UNG fell by 38% and natural gas by almost 37%. This modest gap is due to roll decay attributed to the contango in futures markets. For now, the markets are still in contango, which means this gap between UNG and natural gas prices is likely to further widen in the coming months. But this also suggests that the market expects natural gas prices to start picking up again in the coming months.

The EIA reported another lower-than-expected extraction from storage of 115… Read More …