At the close today, July 26, the Teucrium Corn Fund (CORN) was up 2.55% and the Teucrium Wheat Fund (WEAT) was ahead 4.11%
Both of those commodity plays outgained the U.S. Natural Gas Fund (UNG) with its 1.38% move higher.
But for consistent gains–and the potential for more–I’d have to say that natural gas is my favorite commodity.
(I own all three of these funds in my online portfolios.)
Natural gas futures soared today to a 14-year high of $9.75 per million BTU before pulling back to just a 4.3% gain at $9.10. Natural gas futures are now up 77% in the month. That puts the futures contract on a pace for the best monthly gain ever since the contract’s inception in 1990.
As impressive as today’s move was, however, what I really liked is that it came on a middling news day. We didn’t get some big story driving these gains. In fact, the news was kind of “on-the-one-hand-but-on-the-other-hand.”
The European Union announced a plan to reduce natural gas use by 15% (a negative story for gas prices), but, on the other hand, the measure was weaker than expected with exemptions for Ireland, Cyprus, and the Baltic countries because their gas systems are not connected with that in the rest of the bloc.
Scorching hot weather–with its demand for more electricity to power air conditioning–has been a key ingredient in the gains for natural gas and the worst of that heat wave looks to be passing, but on the other hand, Europe is relatively “air-conditioning-light” in comparison to the United States so the passing of the heat wave won’t change electricity demand as much in the European Union as it would in the United States, and, on the other hand, the passing of heavy cooling-season demand for natural gas moves the market closer to the winter heating season and its surge in demand for natural gas.
It sounds suspiciously like one of those win/win situations for natural gas investors. And with tensions with Russia showing no signs of abating–and in fact, there’s a rising likelihood that those tensions will get worse if Ukraine launches the expected counter-offensive in the next two weeks using Western-supplied weapons to hammer Russian positions–there isn’t anything on the horizon that would produce a significant increase in natural gas supplies.
The Energy Information Administration reported this week that the U.S. was the world’s top liquefied natural gas exporter in the first half of 2022 with LNG exports up 12% from the second half of 2021.
If you’d like to add more natural gas exposure, I’d recommend natural-gas-heavy energy companies. Shares of Cheniere Energy (LNG), the biggest U.S. exporter of liquefied natural, were IP 2.97% at the close. Equinor (EQNR), which operates LNG terminals in the waters off Norway, gained 2.05% today/.
I’d also note that oil went in the opposite direction–south–today. The U.S. Oil Fund (USO) closed down 1.39%. Pioneer Natural Resources (PXD), an oil-heavy/natural gas-light energy producer in the Permian Basin of Texas and Oklahoma closed down 1.35% on the day.
Full disclosure: I own shares of the CORN, WEAT, and UNG ETFs in my personal portfolio.
