UNG and Natural Gas Alert: Contango Is Making a Comeback

We have been following the contango/backwardation situation with natural gas very closely for quite some time. We reported several weeks ago that the status had changed from the usual contango to backwardation, a move that would greatly benefit the popular, but very poor performer, UNG.

UNG chart for the last 6 months:

From mid/late October to mid December UNG did indeed perform very well, and was on a rising trend making a sequence of higher highs.

In fact, prior to  October,  UNG used to lose 10-25% every month due to contango alone. Who would want to buy an investment that loses 10-25% by doing nothing?

Then contango changed to backwardation (please see our previous posts). However, now contango may be making  a comeback. Here is the current situation as of 6AM:

Now, there is  a slight backwardation from February and March contracts to April,  but then contango applies.

Therefore, shall this continue, even if the economy improves and natural gas prices rise, UNG could again suffer and become its old self again.


Stay tuned, we will continue following and reporting the natural gas market.