Another Reason to Eye the UNG: Big Business

Thanks to natural gas prices coming down and more discoveries of American deposits utilities are debating whether to retrofit coal plants for gas. Big corporations such as AT&T (NYSE:T) and United Parcel Service (NYSE:UPS)  are beginning to convert large truck fleets from oil-based gasoline to natural gas.  Could this be a reason to start looking at going long the United States Natural Gas Fund, LP (NYSE:UNG)?

The United States Natural Gas Fund (UNG), the largest oil and gas exchange-traded product, recently issued new shares for the first time
since July. The lengthy interval between new share issuances certainly wasn’t due to a lack of demand. In recent months, investors have been clamoring to get access to natural gas, bidding up shares of UNG to a huge premium and causing the fund to look and act more like a closed end fund than an ETF.   The UNG has bounced all over the place this year, $17 in May, $9 in September, and YTD the ETF is down 50%. 

Elevated Section of the Alaska PipelineFacing an uncertain regulatory environment and unrelenting demand from investors, UNG has for months found itself between a rock and a hard place. If UNG had issued new shares to satisfy investor demand, the fund would have put itself in jeopardy of violating regulations expected to be issued by the CFTC regarding position limits on futures contracts.

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