10-Q: Natural Gas Fund Reports NAV Decline Amidst Volatile Market

United States 12 Month Natural Gas Fund, LP reported a decrease in Net Asset Value per share and a net loss for the quarter ended June 30, 2026, reflecting the volatility in natural gas futures.

Summary

• The United States 12 Month Natural Gas Fund, LP (UNL) reported a net loss of $1,765,430 for the six months ended June 30, 2026, compared to a net income of $1,801,480 in the same period of 2025.
• Net asset value (NAV) per share decreased to $6.42 as of June 30, 2026, from $7.34 at the end of 2025.
• The fund experienced a total return of -12.53% for the six months ended June 30, 2026.
• Natural gas futures prices were volatile, with the average price of Benchmark Futures Contracts decreasing by approximately 8.86% over the six-month period.
• Total assets decreased to $17,413,869 as of June 30, 2026, from $18,815,131 as of December 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to the significant decrease in Net Asset Value (NAV) per share and the overall net loss reported for the period, despite the fund's objective to track natural gas futures.

Positives

• The fund's NAV performance of -12.53% for the six months ended June 30, 2026, outperformed the benchmark's hypothetical return of -13.34% by 0.81%.
• Interest and dividend income earned on collateral holdings contributed positively, with an annualized yield of 3.51% on average daily total net assets for the six months ended June 30, 2026.
• The fund maintained its investment objective, with the average daily percentage change in NAV within 10% of the average daily percentage change in the Benchmark Futures Contracts over a 30-valuation day period.

Negatives

• The fund reported a net loss of $1,105,281 for the three months ended June 30, 2026, and a net loss of $1,765,430 for the six months ended June 30, 2026.
• Net asset value per share decreased from $7.34 at December 31, 2025, to $6.42 at June 30, 2026.
• The total return for the six months ended June 30, 2026, was a negative 12.53%.
• Realized losses on closed commodity futures contracts amounted to $2,383,884 for the six months ended June 30, 2026.
• The fund experienced a decrease in total assets from $18,815,131 to $17,413,869 during the period.

Risks

• Market volatility in natural gas futures can significantly impact the fund's NAV and returns.
• The fund is exposed to commodity price risk, particularly natural gas price risk, through its holdings of futures contracts.
• Contango and backwardation in the natural gas futures market can affect total returns.
• Potential for counterparty credit risk exists with OTC swaps, although the fund limited its OTC activities to EFRP transactions during the period.
• Interest rate risk may affect the value of fixed income securities and the ability to reinvest at prevailing rates.
• The fund may lose money by investing in government money market funds, as these are not insured or guaranteed.

Future Outlook

The fund's investment objective is to have the average daily percentage changes in its Net Asset Value (NAV) per share reflect the average daily percentage changes of the spot price of natural gas, plus interest earned on collateral, less expenses. The fund aims to achieve this by investing primarily in natural gas futures contracts. Future performance will depend on the volatility of natural gas prices and the fund's ability to manage tracking error, influenced by factors like contango/backwardation, expenses, and market conditions.

Management Comments

• USCF believes that market arbitrage opportunities will cause daily changes in UNL's share price on the NYSE Arca to closely track daily changes in UNL's per share NAV on a percentage basis.
• USCF believes that daily changes in the average prices of the Benchmark Futures Contracts have historically closely tracked the daily changes in the spot price of natural gas.
• USCF anticipates that interest rates may continue to stagnate over the near term from historical lows, potentially allowing fees and expenses to be lower than interest earned, leading to outperformance of the benchmark.

Industry Context

StockSavvy.ai notes that the natural gas market is subject to significant seasonal patterns, geopolitical events, and global demand shifts, particularly with increased LNG exports. The fund's performance is directly tied to these volatile commodity prices and the complexities of futures contract rollovers, which can lead to tracking differences compared to the spot price.

Comparison to Industry Standards

• The fund's objective is to track the average daily percentage changes in the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by 12 futures contracts, within a 10% tolerance over 30-day periods.
• For the 30-valuation days ended June 30, 2026, the average daily change in the Benchmark Futures Contracts was (0.007)%, and UNL's NAV change was (0.003)%, indicating performance within the tracking goal.
• Since inception (November 18, 2009) to June 30, 2026, the average daily change in Benchmark Futures Contracts was (0.030)%, and UNL's NAV change was (0.028)%, also within the tracking goal.
• The correlation matrix shows that natural gas has historically had low correlation with major equity indices (S&P 500: 0.108 over 10 years, 0.189 over 1 year) and US government bonds (BEUSG4 Index: -0.156 over 10 years, -0.170 over 1 year), suggesting it acts as a diversifier.

Legal Proceedings

• Optimum Strategies Action: Claims under the Securities Exchange Act of 1934 were dismissed with prejudice.
• Settlement of SEC and CFTC Investigations: USCF and USO paid $2.5 million in aggregate civil monetary penalties.
• In re: United States Oil Fund, LP Securities Litigation: A consolidated class action is pending, with a motion to amend the complaint currently under review.
• Mehan Action: A derivative action alleging breach of fiduciary duties is stayed pending disposition of motions in the related US Oil Fund litigation.
• In re United States Oil Fund, LP Derivative Litigation: Consolidated derivative actions alleging violations of securities laws and breach of fiduciary duties are stayed pending disposition of motions in the Lucas Class Action.

Related Party Transactions

• USCF, as the general partner, receives a management fee of 0.60% per annum of average daily total net assets.
• USCF pays the marketing agent fee (0.025% of UNL's total net assets) and BNY Mellon's fees for custodial, administrative, and transfer agency services.
• UNL shares fees and expenses for independent directors and officers liability insurance on a pro rata basis with Related Public Funds.

Stakeholder Impact

• Shareholders experienced a decrease in Net Asset Value per share and a negative total return for the period.
• The fund's objective is to provide investors with a cost-effective way to invest indirectly in natural gas.
• Authorized Participants can create or redeem baskets of shares, influencing the number of outstanding shares.

Next Steps

• Continue to manage the portfolio to ensure the average daily percentage change in NAV per share remains within 10% of the average daily percentage change in the Benchmark Futures Contracts over 30-day periods.
• Monitor market conditions, regulatory requirements, and risk mitigation measures that may necessitate adjustments to investment strategy or holdings.
• The fund has an unlimited number of shares registered and available for issuance, allowing for creation and redemption baskets by Authorized Participants.

Key Dates

Recommendation

The fund's NAV has declined, and it reported a net loss for the period, indicating negative performance. While it aims to track natural gas futures, the volatility and expenses have impacted returns. However, the fund did outperform its benchmark slightly and continues to operate within its stated objective. Given the mixed results and inherent volatility of the underlying commodity, a 'hold' recommendation is appropriate for existing investors, while new investment requires careful consideration of the risks.

Keywords

natural gas futures, commodity futures, NYMEX, Henry Hub, energy commodity, fund, investment, derivatives