It’s a volatile day for natural gas stocks and funds. Some of the most notable names include the United States Natural Gas Fund (NYSEARCA:UNG), ProShares Ultra Bloomberg Natural Gas (NYSEARCA:BOIL) and ProShares UltraShort Bloomberg Natural Gas (NYSEARCA:KOLD). The catalyst for today’s move is news from a European Union (EU) diplomat that the G7 nations are weighing a price cap on Russian petroleum.
Reportedly, the G7 and EU are considering a price cap on Russian sea-borne oil in the range of $65 to $70 per barrel. The G7 ambassadors discussing the proposal aim to reach an agreement by the end of the day.
In its current form, the price cap on sea-borne exports of Russian oil would take effect on Dec. 5. This would be part of a larger framework of sanctions “intended to slash Moscow’s revenue from its oil exports.” The idea, presumably, would be to limit Russia’s ability to finance its invasion of Ukraine.
What’s Happening With Natural Gas Stocks?
Some people might not expect this result. In early-morning trading, a number of long natural gas stocks or funds went up. For instance, the unleveraged UNG long natural gas fund gained about 7% this morning. Meanwhile, the double-leveraged long natural gas fund, BOIL, moved up roughly 14%. At the same time, the double-leveraged long natural gas fund, KOLD, fell about 15%.
These price moves may seem counterintuitive. However, price caps on petroleum are no guarantee of lower spot and fund prices in natural gas. In other words, Wall Street might not be convinced that an imposed price limit will have the intended effect.
Furthermore, the proposed price cap isn’t fully settled yet. Poland, Lithuania, Estonia, Cyprus, Greece and Malta reportedly have issues with the proposal in its current form.
So, don’t be surprised if the prices of natural gas stocks and funds remain in flux for a while. And check back for updates as the G7 nations strive to hammer out the details of this potentially market-moving proposal.
On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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