United States Natural Gas ETF (NYSE: UNG) and natural gas futures are trading near 6 month highs. The price of natural gas settled at its highest level since January this past Tuesday, and since then price tapped fresh highs at $2.95 per million BTU.
Over the past month, UNG has climbed higher by close to 15 percent. The move higher was driven by increased demand for natural gas used for energy production at power plants. On a short term bases, hotter weather in the U.S. is lifting prices. On a longer term basis, historically low prices have contrarian investors bottom fishing with hopes of major turn in prices.
Recent inventory data has shown that natural gas inventory builds have been lower than their 5 year average. As the price of natural gas declined over the past year, the rig count has also fallen. This is a signal to many investors that supply and demand dynamics have lined up.
>From a technical perspective, $3 is seen as a critical level. A failure to break and hold above $3 this week may put natural gas futures back under pressure, with support coming back in at $2.70.
