Storage operators capture the majority of that spread. As a futures investor, you cannot capture the differential as you cannot touch the physical. Winter always carries a premium to the summer as part of the economics of storing gas, and the fact that winter is the peak demand season of gas.
Natural Gas versus Oil
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Storage operators capture the majority of that spread. As a futures investor, you cannot capture the differential as you cannot touch the physical. Winter always carries a premium to the summer as part of the economics of storing gas, and the fact that winter is the peak demand season of gas.
I'm not saying you can't make any money with UNG, I guess I'm saying it is an inferior tool for a proxy to natural gas. If you want to trade the fixed price of natural gas, open a futures account and trade that, it's what UNG is doing except they are charging you a fee and they have layed out their roll for all the real traders to make money off of like vultures (front running).
I obviously trade the futures, if a guy wasn't interested in doing that, I would advise building a basket of nat gas oriented companies as my proxy to the market. I am not a stock picker so I can't tell you which ones to own, but a basket of them for sure over outright UNG investment.
UNG can make some money, but they need the prompt month to rally for that to happen, meanwhile the curve is so steep, the gains to be made are already in the market so UNG is inferior right off the bat. I don't know the internals of all the natty heavy companies, but I would risk buying Chesapeake and Petrohawk types over UNG anyday.
A large new NG field was reportedly discovered in Lousiana about a month ago, too.
http://online.wsj.com/article/SB124104549891270585.html
http://online.wsj.com/article/SB124104549891270585.html
Are there hedge funds that store NG? Like maybe a certain Houston energy fund? Would doing this give them any additional insight into the market? BTW Roach, thanks for helping to make the energy forum an oasis in the desert of sh@t that is ET.
So UNG will lose money on every rollover with this contango. Papa is right 100% (as usual) on this subject. The contango for NG is very wide, Right now the spread between the near active July ($3.713) and the December 2009 contract ($5.787) a jaw-dropping $2,055! That's WAY TOO WIDE. Which, of course, means that the market has become out of balance and the propensity should be for the contango to contract more than not over the summer.
The amount of NatGas added to storage last Thursday was well above expectations at 124 bcf and on the other hand there were too many wells brought on line over the past three years and the production profile has yet to show material declines and there have been fantastic discoveries in the various shale deposits in the Mid-Continent and in Louisiana.
With that said, the NatGas market is apparently a market waiting for a catalyst, The price of NatGas is extraordinarily low as measured by just about any metric one wishes to use and Investors are bidding up natural gas companies even as NatGas itself bounces along near its bottom. Is certainly possible that we could see NatGas make another new low before it answers the same forces that have propelled the NatGas companies so much higher.
As Papa said, it's better to trade some Natgas stocks instead the UNG ETF, some natural gas companies can make money even at $4 natural gas.
The amount of NatGas added to storage last Thursday was well above expectations at 124 bcf and on the other hand there were too many wells brought on line over the past three years and the production profile has yet to show material declines and there have been fantastic discoveries in the various shale deposits in the Mid-Continent and in Louisiana.
With that said, the NatGas market is apparently a market waiting for a catalyst, The price of NatGas is extraordinarily low as measured by just about any metric one wishes to use and Investors are bidding up natural gas companies even as NatGas itself bounces along near its bottom. Is certainly possible that we could see NatGas make another new low before it answers the same forces that have propelled the NatGas companies so much higher.
As Papa said, it's better to trade some Natgas stocks instead the UNG ETF, some natural gas companies can make money even at $4 natural gas.
They roll forward over 4 days. remember the disconnect in USO (UNG's sister fund for oil) a few months ago? They were rolling truly massive volume forward in 1 day. They've since gone with a 4 day roll, and it now doesn't distort the market anymore (the roll forward doesn't anyway...).
Oh, and regarding UNG, just in case anyone hasn't picked up on this: they carry only prompt month gas (or 1.5 months forward, depending on what time of the month it is...). Moves in the curve beyond a month or two have no impact on UNG.
So today, if March '10 gas shot up 50% UNG would do nothing (unless Jul & maybe Aug '09 NG moved too, which they are unlikely to).
So today, if March '10 gas shot up 50% UNG would do nothing (unless Jul & maybe Aug '09 NG moved too, which they are unlikely to).
