BOIL, UNG ETFs boosted by natural gas prices: what next?

The ProShares Ultra Bloomberg Natural Gas ETF (BOIL) and the United States Natural Gas Fund (UNG) continued their uptrend as investors cheered the recent surge of natural gas prices. UNG, which crashed to a low of $4.60 in December, rose to a high of $7 on Tuesday. BOIL, on the other hand, jumped to $40 after it slipped to $23.87 in December.

Why UNG and BOIL ETFs are rising

This performance is because of the soaring natural gas prices, which have moved to a high of $3.11, up from December’s low of $2.21. Gas has jumped sharply as the withdrawal season intensifies. In the United States, this season lasts between November and March when demand for heating rises. 

The most recent weather reports show that the US and Canada are experiencing a colder winter than in recent years. It could be 10 to 15C below seasonal average while some places like Edmonton are seeing minus 30C. This season is then leading to more demand for natural gas in the country.

Still, it is unclear whether the natural gas prices will continue rising because the world is in an era of abundance as production rises. Countries like the United States and Qatar have boosted their production substantially in the past two years. 

According to the EIA, dry gas production rose to 103.72 billion cubic feet per day in 2023 and is expected to hit 105 bcfd this year. This is a big increase from the 99.6 bcfd that the US produced in 2022. 

Meanwhile, LNG prices in North Asia continued plunging as the spot rate hit $9.8 per million British thermal units, the lowest level since June last year. Like in the US and Europe, Asian countries are well-supplied from countries like Russia and those in the Middle East. 

Therefore, there is a likelihood that the BOIL and UNG ETFs surge could be short-lived because of the abundant natural gas supplies. 

Natural gas price forecast

Natural gas chart by TradingView

Technical analysis of natural gas can help us to estimate whether the BOIL and UNG ETFs will continue rising. Turning to the daily chart, we see that the natural gas price has recovered from the December low of $2.22 to a high of $3. As it rose, gas has risen above the 50-day and 25-day Exponential Moving Averages (EMA). 

The Relative Strength Index (RSI), on the other hand, has risen from the extremely oversold level of 20 to over 60. This is a sign that natural gas is gaining momentum. Therefore, I suspect that the price will continue rising as buyers target the key resistance at $3.25, the lower side of the ascending channel. The price will likely retreat after retesting that level.