Natural gas: contango is back in full force; terrible for UNG

We reported last that natural gas prices were in contango again. The situation continues now, and is even worse as front month prices have collapsed again.

From March to July the difference is a contango of 5.7%.

UNG needs to sell all its futures contracts every month and acquire new ones for the following month. In the process, it acquires fewer contracts for the same amount of money. As the process continues in the future, UNG loses money by doing nothing.

It is quite interesting that when we detect (and report here) backwardation, UNG rises, and when we detect that contango is back, UNG collapses.

Keep an eye on this. This is buyer beware.