Natural Gas Breaks Out

After a long decline, natural gas has rebounded and is now trading at levels not seen since March.

UNG
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At the same time, oil continues to decline in concert with the Euro, despite a moratorium on new offshore drilling.

The United States Natural Gas Fund (UNG) ended last week at $8.18, up nearly 17% in the past month.  The United States Oil Fund (USO) is down nearly 18% over the same time period.

UNG tracks the near month futures price of natural gas while USO tracks the spot price of oil.  Both commodities have seen increased volatility in recent weeks as the European debt crisis has weakened the Euro and the gulf oil spill casts a shadow over the future of oil demand while brightening the prospects for natural gas.

According to the AP, natural gas prices got a boost from hot weather pushing up electricity production and from forecasts of an active hurricane season ahead. Some utilities are using more natural gas instead of coal as tighter emissions standards loom. Hurricanes can disrupt natural gas production as offshore producers shut down to ride out storms.

In addition, natural gas prices were helped by new rules for lower sulfur dioxide emissions from the Environmental Protection Agency. Coal-fired power plants and factories are the main source of that breathing irritant.

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