Credit: Shutterstock photoDrew Voros
ETF.com Editor-in-Chief
Only 2 ½ months into 2017, natural gas futures are down 18.5%, while the United States Natural Gas Fund (UNG) is down 21.3% and the VelocityShares 3x Long Natural Gas ETN (UGAZ) is down 58%, making the latter the poorest-performing exchange-traded product of the year so far.
Prices for natural gas fell through the floor during the first two months of the year after one of the warmest winters on record sapped demand for the heating fuel.
Almost every category of natural gas supply and demand was moving in a bullish direction before the warm winter shook things up. During 2016, U.S. production dropped 1%; exports of liquefied natural gas increased from nothing to about 1 bcf/d; industrial demand climbed 2.5%; and electric power demand jumped 3.2%. From a 17-year low of $1.61/mmbtu reached in March 2016, natural gas futures increased to just below $4 by the end of the year (which was a two-year high at the time).
Today natural gas is trading close to $3 after the warm-winter pullback, but perhaps Mother Nature has merely provided investors with an opportunity to buy before the recovery in prices resumes.
That seems to be what investors are thinking. Since the start of the year, UNG saw $79 million worth of fresh money come into the fund. Even more, the triple-leveraged UGAZ saw a whopping $748 million worth of inflows in the period.
With about $650 million in current assets under management, UGAZ is now the largest natural gas ETF on the market, surpassing the $500 million UNG. That means that many investors are betting boldly and aggressively that natural gas will bounce from here.
Only time will tell whether natural gas investors will finally be rewarded for buying into this promising fuel of the future.
ETF Inflow Streak Continues
Inflows into U.S.-listed ETFs continued at a torrid pace, as $19 billion came into the space in the week ending Thursday, March 16, according to FactSet. The year-to-date total for inflows now stands at $124.7 billion. Investors added money into ETFs for a 19th-straight week, dating back to after the election and Trump’s victory.
U.S. equity funds took in the bulk of new money as the S&P 500 hovered near record highs. Inflows into this segment totaled $13.2 billion.
The SPDR S&P 500 ETF (SPY) took the top spot on the weekly inflows list, with $2.5 billion of inflows, followed by the Vanguard Dividend Appreciation Index Fund (VIG), with its $1.5 billion of inflows.
VIG was one of two dividend-focused ETFs to make the top 10. The other was the Vanguard High Dividend Yield Index Fund (VYM), with $673 million worth of inflows.
On the outflows side, the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) easily took the top spot, with redemptions of $947 million. Junk bond ETFs hit a bit of a road bump during the past week as the sell-off in oil prices raised worries about energy sector defaults.
Drew Voros can be reached at dvoros@etf.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
