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Oil tilts with global sentiment but natural gas remains cheap (USO, UNG)

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Oil has been giving back some of its recent gains, but compared to natural gas, the exchange-traded fund, United States Oil ( USO , quote ) actually looks a little rich when you consider how gloomy the outlook is for Europe and the United States. The biggest exchange-traded fund for natural gas, United States Natural Gas ( USO , quote ), was pitched as a buy in a recent article on www.emergingmoney.com , terming it the " mother of all arbitrage plays ." However, while UNG was still up almost 2% last week, it is tanking today and is down a full 14% since early October. By comparison, USO is up a breathtaking 24% over the same time period. Gas is emerging as a contrarian play. When equity markets sink, oil sinks with them -- but gas rises. On a day like today, the speculators are back in stocks and oil alike and UNG is in retreat. Speculators aside, cold weather is coming in the northern hemisphere and gas contracts are rolling over, so United States Natural Gas (UNG) should be rising as the temperature falls. Whether this means stocks are due a corresponding decline is less certain, but with countries across the globe earning downgrades and industries reporting drops in sales, demand simply may not there to support the huge increase in oil prices we have seen recently.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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