Why UNG Is Up 15% Today

Natural gas has been one of the most difficult investments to predict through out 2012, as it started off the year on a horrific note. Though the commodity was able to gain steam in recent sessions, it has yet to establish any kind of meaningful trend upwards, as prices still remain depressed from a historical standpoint. One of the most popular ways for traders to access natural gas futures is by utilizing the United States Natural Gas Fund (UNG), one of the most popular ETFs in the world. The fund has just over $900 million in assets and trades nearly 10 million times each day, but this ETF made a huge buzz during trading today, as it posted massive gains [see also 25 Ways To Invest In Natural Gas].

UNG was able to gain nearly 15% for Thursday’s trading session, as traders set the fund on fire with abnormally high volumes to match the abnormally high gains. UNG has been known to move roughly 3% or 4% in one day, but a 15% movement is largely unheard of. With a number of investors betting against this ultra-popular fund, today’s gains come as a disappointment as well as a mystery to many. UNG’s big day started off with the weekly EIA Natural Gas Inventory Report, which is generally a large mover for the fund. The weekly report was expected to show NG stockpiles of 75 billion cubic feet (bcf), but inventories came in at 67 bcf instead, far lower than anyone expected [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].

As a result, UNG and natural gas alike spiked, as investors saw that demand for this sputtering commodity had picked up over the last week and that maybe we have underestimated our need for the fossil fuel. UNG responded with its best day of 2012 and its best session in recent memory, not to mention that it traded more than 2.5 times its daily volume. Although the EIA report was the culprit of UNG’s monster session, the trading fury also helped the ETF on its way to profitability, as a number of positions were shifted about in the fund. Be very wary of UNG in the coming days, as a massive spike like this is almost always followed by a falling out. Trade accordingly.

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Disclosure: No positions at time of writing.

This entry was posted in Commodity Futures, Content Categories, Energy, Natural Gas and tagged . Bookmark the permalink.

Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

3 Responses to “Why UNG Is Up 15% Today”

  1. [...] The United States Natural Gas Fund (UNG) was the best performers, gaining an incredible 14.97% on the day. With lower than expected natural gas inventory levels, this ETF gapped higher at the open only to charge even higher throughout the day. UNG closed near its high, just shy of $17.53 per share [see Why UNG is Up 15% Today]. [...]

  2. [...] if UNG and natural gas hadn’t already made a splash with their 15% performance last week, the fossil fuel was at it again today. Natural gas futures jumped by about 7.3% on the day, while [...]

  3. [...] if UNG and natural gas hadn’t already made a splash with their 15% performance last week, the fossil fuel was at it again Monday. Natural gas futures jumped by about 7.3% on the day, while [...]

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