What's Moving Natural Gas Prices

Uh, UNNG invests in the front month future contract.

The front month future is exposed to the most uh extreme price moves up and down uh just because it's nearest to the spot contract whereas contracts further out on the futures curve uh tend to move a little less when there's a big shock u positive or negative to natural gas prices.

UNL owns the entire uh the first 12 months in the future strip.

Uh so it tends to uh potentially mitigate some of that volatility.

Uh but more importantly, copper or sorry, natural gas tends to be a commodity that is in what's called contango and that creates uh something you may have heard of called a a negative roll yield.

That can just be a headwind against your return.

So UNL when that condition is in place uh can mitigate uh that potential uh negative uh ro yield.

Doesn't guarantee a positive return. and being in the front month uh even in a state of contango doesn't mean you're going to have a negative return but that is kind of a persistent thing in natural gas uh markets.

So UNL is designed to uh try to mitigate that somewhat.

Um the outlook for natural gas that's an interesting one because we are starting to well we have started to import uh considerably more liquid natural gas than we have in the past but at the moment it is still very much a a US commodity. there are overseas contracts but in UNNG and UNL we are buying the US contract and so it's very much driven by US supply and demand that means whether um events uh like uh Gulf Coast hurricanes that take supply offline or interrupt um uh shipping of of liquid natural gas can really impact the market.

So it's really driven by domestic uh production.

We are running below uh the sort of the highs over the last 5 years that we hit last year, but we're above the 5year average.

So, right now, natural gas started off the year great.

Uh it was up over 40%.

Uh it's now down uh over 20% uh year to date.

Um that has a lot to do with weather and uh you know, just the amount of natural gas storage.

But over the long term, again, you as you mentioned, it's very vital.

So I think that's a product that uh you know investors are looking at it that's where you want to have probably a shorter term view a tactical use that as a tactical tool as opposed to necessarily something you just buy and hold.

And if you did want a longer period and the market's in contango UNL is probably um going to uh mitigate uh some of those headwinds that you face when contango is in place.