Natural gas futures continued to decline last week after a government report showed a smaller than expected withdrawal from inventories.

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The United States Natural Gas Fund (UNG), an exchange traded security designed to reflect the changes in percentage terms of the price of natural gas, is down nearly 30% in 2010 and down nearly 60% from year ago levels.

Last week’s report from the US Energy Information Association took analysts and traders by surprise according to a story by the Wall Street Journal.  Warm weather in the major gas-consuming regions is curbing demand for gas for heating as spring approaches, while production from onshore fields continues to flood the market with supply according to the report.

At the same time, major oil companies are snapping up natural gas assets, especailly those properties with unconvential sources of natural gas.  In recent months ExxonMobil agreed to pay around $30 billion for XTO Energy, which specializes in extracting gas trapped in shale rock in the U.S. In another deal, France’s Totalagreed in January to acquire a quarter of Chesapeake Energy’s Texas shale gas resource for $2.25 billion. More recently, BP cut a much smaller deal with Lewis Energy for half of its Texas shale territory.  In the latest deal, Royal Dutch Shell and Petrochina have jointly offered A$3.26 billion for Arrow Energy, a producer of natural gas from coal seams in Australia.

Industry experts see natural gas as a potential way for the US to lower its dependence on carbon intensive energy sources like oil and coal.

Other ways to gain exposure to natural gas with ETFs include the First Trust ISE-Revere Natural Gas Index Fund (FCG) which tracks an equal-weighted index of companies that derive a substantial portion of their revenues from the exploration and production of natural gas.

For more ETF investing choices, see the ETF Directory or the special report on Investing in Natural Gas with Exchange Traded Funds.