Following the Gyrations of Oil and Natural Gas ETFs

 |  Includes: DBO, FCG, UNG, UNL, USL, USO
by: Tom Lydon

As worries about the economy and consumer confidence ebb and flow and supply reports fluctuate, oil and natural gas ETFs are being taken for a similarly wild ride.

These commodities sure are sensitive these days.

In the past six months, oil has plunged twice, but bounced back quickly, Kurt Brouwer for MarketWatch points out. Now, oil prices have dropped well below their 50-day moving average, with prices around $70 a barrel.

Oil has weakened in the past few weeks partly due to concerns over economic growth in Europe, China and the United States. Furthermore, the outlook for inflation this year is moderate and the economic outlook is looking soft, which translates to a subdued interest in oil.

Natural gas prices, on the other hand, have moved past their 50-day moving average, with prices now wobbling around $4. Energy analysts also point out that supply and demand fundamentals are weak, writes Jason Womack for The Wall Street Journal.

Despite anticipation of increased summer demand, natural gas storage levels are 16.6% above their five-year average, the rig count is soaring and and drilling activity is increased. This means that the stepped-up supply may not be falling off anytime soon, further contributing to depressed prices.

Trying to predict when, how and how much oil and natural gas prices recover is going to be an exercise in futility when the economy is on such uncertain ground. What’s more, major oil and natural gas ETFs are sitting well below their long-term trend lines (the 200-day moving average), so this may be a situation of “wait and see” for the time being.

  • United States 12-Month Oil (NYSEARCA:USL)
  • United States Oil (NYSEARCA:USO)
  • PowerShares DB Oil (NYSEARCA:DBO)
  • First Trust ISE-Revere Natural Gas (NYSEARCA:FCG)
  • United States Natural Gas (NYSEARCA:UNG)
  • United States 12-Month Natural Gas (NYSEARCA:UNL)

Max Chen contributed to this article.

Full disclosure: Some of Tom Lydon’s clients own shares of UNG.