UNG and BOIL: Remarkable meltdown of natural gas ETFs accelerates

By:
on Feb 16, 2024
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  • Natural gas prices have plunged hard in the past few months.
  • It has crashed by over 54% from its highest point in 2023.
  • BOIL and UNG ETFs have all joined the strong sell-off.

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The ProShares Ultra Bloomberg Natural Gas ETF (BOIL) and the United States Natural Gas Fund (UNG) plunged hard this week as the price of natural gas collapsed. UNG has dropped in the past eight days and is hovering at its all-time low. It has retreated by 46% from its highest point this year.

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BOIL, on the other hand, has also retreated to a record low after falling by 65% from the highest point this year. The two natural gas ETFs have been in a strong downward trend for a long time. BOIL has moved from its all-time high of $14,730 to $14 while UNG has moved from $160 to $14.

BOIL and UNG ETF

BOIL and UNG ETF chart

The current phase of the retreat is because of the ongoing natural gas price meltdown. Data shows that natural gas prices have crashed in the past five straight days and are nearing their lowest level on record. They have fallen by over 54% from their highest point in 2023.

Natural gas has been in a downtrend even as global demand rises. This performance is mostly because of the ongoing era of abundance in the commodity. Russia is still pumping vast amounts of natural gas amid sanctions and the loss of the European market. It has diverted most of its natural gas shipments to countries in Asia and Africa. 

Other countries are also boosting their natural gas exports. The US has become the biggest player in this commodity in the past few years. The EIA estimates that the country’s production will move to 103.72 billion cubic feet per day (bcfd) in 2023 to 105.13 in 2024. This is notable since the country produced 99.6 bcfd in 2022.

Further, countries like Australia and Qatar are also seeing more production. Australia, the fifth-biggest producer in the world, is seeing higher production while Qatar is fulfilling its orders to European customers.

Natural gas demand may continue rising as countries replace coal, which is still a popular energy source around the world. However, it is unclear whether this demand increase will continue in the coming months.

The ongoing collapse of natural gas prices has also hurt key producers. Cheniere Energy (LNG) stock price has moved to a correction as it dropped by 13% from its 2023 highs. Other firms like EQG and Kinder Morgan have also retreated.

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