Friday, June 4, 2010

US Natural Gas Fund (NYSE:UNG) Soaring

The supply of natural gas in relationship to demand has put downward pressure on heavily exposed natural gas companies and natural gas ETFs like US Natural Gas Fund (NYSE:UNG).

That has changed over the last couple of weeks, as the US Natural Gas Fund has surged by over 12 percent during that time.

It has been March since UNG has traded at current price levels.

With nothing much in the supply equation changing, other than the evil attempt by some Democrats to limit access to the natural gas resources in the Marcellus Shale, it's probably backwardation at this time which has been driving the price of UNG recently.

Backwardation refers to the time future gas prices drop below expected future spot gas prices. That favors an ETF fund like UNG.

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