UNG Up 15% as Natural Gas Supply Dwindles

United States Natural Gas (NYSE: UNG) shares have been free-falling for the better part of a month. In one day, the ETF is making up most of that lost ground.

UNG shares soared 15% today after the Energy Information Administration reported natural-gas inventories that were way below what economists were expecting. The 67 billion cubic feet of inventory reported last week trailed the 75 billion cubic feet that was forecast by a wide margin. With supplies slipping, prices are quickly escalating.

On May 23, UNG closed at $19.42 a share. Today, the ETF opened at $15.25 a share. Now it’s all the way back up to $17.52 a share.

Now natural gas prices are following suit – something that doesn’t always happen. After opening at $2.20 today, nat gas closed at $2.49 – a one-day surge of 13.4%.

Of course, natural gas is still incredibly cheap. UNG has been one of the worst performing ETFs of all time, as our own Kevin McElroy recently pointed out. Even after today’s sizable gains, UNG has still fallen 95% in the last four years.

And at roughly $2.50 a share, natural gas spot prices are still close to 10-year lows.

So what does it all mean? It means that despite today’s huge pop, it’s still best to avoid UNG. Kevin argues that the ETF has performed so poorly for so long that it will eventually get de-listed.

As for natural gas itself, the lower-than-expected inventories could signal that supplies are finally starting to dwindle. It’s just one weekly report, so it’s nothing to get too worked up about yet. But if the trend continues, perhaps natural gas prices are finally ready to break out of their two-and-a-half year funk.   

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