Cold snap no reason to go long US natural gas, says Markit

Analysis of flows into exchange traded products investing in natural gas suggests investors are not reacting to a recent sharp rise in the price of the commodity in the US.

Markit analysts note that recent cold weather in North America has pushed prices on the so-called Henry Hub up by 17% since the start of the year, to their highest levels seen in over four years.

But ETF flows overall remain unchanged, with investors taking profits from long funds, and investing more in short funds.

“Funds which stand to gain from further increases gas prices have seen $391m of outflows in the last four weeks, while funds which will benefit from a snap back in gas prices have attracted $487m of new assets,” Markit stated.

“Investors have been most active in the leveraged market. Of the 38 funds which track natural gas prices, three and four times inverse funds have seen inflows representing twice their original AUM from the start of the year.”

Additionally, while prices of shares in oil and gas producers have risen along with near term gas price rises, but this does not indicate that gas prices will remain higher for longer.

Those investors who are active in borrowing shares to short energy companies instead seem to be focused on coal companies, Markit added.



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