Fund flows point to nat gas spike as short-lived

|By:, SA News Editor

While forecasts for another brutal winter blast extending into March have sent natural gas prices to 5-year-highs (now above $6 per MBtu), money is exiting ETFs tied to the commodity. The largest of the funds - the U.S. Natural Gas Fund (UNG +0.3%) - has seen $366M, or about 36% of assets drain out this year. About $8M has flowed out of the $23M U.S. 12-month Natural Gas Fund (UNL +0.7%).

John Hyland - CIO of the issuer of the UNG - says this curious behavior (!) - is typical for the fund. "What you tend to see is  that spikes in prices generally are associated with drops in … shares outstanding ... This tends to surprise people since, although we all know that the object is to buy low and sell high, we are always shocked when people actually do it."

The flip side: Money has poured into funds which would profit when natural gas prices fall. The VelocityShares 3x Inverse Natural Gas ETN (DGAZ +0.7%) has attracted $449M this year.

Nat gas ETFs: UNG, UGAZ, DGAZ, BOIL, GAZ, KOLD, UNL, NAGS, DCNG