Natural gas ETFs rally with native gas prices at 13-year highs

NOTExchange-traded funds linked to natural gas climbed Thursday, with natural gas prices hitting a 13-year high, as tight energy supplies keep prices high.

the United States Natural Gas Fund (NYSEArca: UNG) rose 5.4% on Thursday and is up 65.5% year-to-date. Meanwhile, Nymex natural gas futures rose 5.5% to around $6.36 per million British thermal units.

U.S. natural gas prices are “sensitive to any short-term supply issues created by events such as a ban on Russian coal exports, abnormally cold weather,” or gas export issues Russian natural, given tight global supplies, Rob Thummel, portfolio manager at Tortue, told MarketWatch.

Fueling the surge on Thursday, the US Energy Information Administration revealed a higher withdrawal rate of 33 billion cubic feet from storage inventory for the week ended April 1, reports Natural Gas Intelligence.

With the latest storage report, we are at the end of the traditional pullback season, leaving stocks well below historic levels and reigniting bullish momentum.

“A low number for storage… is going to be an interesting summer,” a participant in The Desk’s online energy chat, Enelyst, told Natural Gas Intelligence.

“That’s not the number you want to see if you’re in the big spring injection camp,” added another attendee.

Natural gas prices also rallied on the surge in energy prices, with close rival alternative coal also trading at its highest level since 2008, according to EIA data. Due to the sharp rise in coal prices, many power producers have switched to natural gas.

Coal generally “substitutes” natural gas when natural gas becomes expensive, or vice versa, Thummel added. In the current market environment, global coal stocks are at an all-time low and global production has declined due to heightened mistrust of the environmentally polluting energy source.

Further fueling supply-side issues, Europe proposed a ban on Russian coal imports in response to its invasion of Ukraine. The Group of Seven leaders said in a statement on Thursday that they “will accelerate our plan to reduce dependence on Russia for our energy, which includes phasing out and banning imports of Russian coal “.

Thummel noted that banning Russian coal would further reduce coal inventories and raise commodity prices, while supporting natural gas as an alternative.

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