10-K: UNG Reports 27.6% NAV Decline in Volatile Natural Gas Market

United States Natural Gas Fund, LP (UNG) reported a 27.60% decrease in its per share Net Asset Value for the year ended December 31, 2025, despite outperforming its complex benchmark's expected total return by 4.50%.

Summary

• UNG's per share Net Asset Value (NAV) decreased by 27.60% to $12.20 at year-end 2025, down from $16.85 in 2024.
• The nominal price of the Benchmark Futures Contract for natural gas increased by approximately 1.46% during 2025, from $3.633 to $3.686 per MMBtu.
• UNG's actual total return of (27.60)% for 2025 outperformed its benchmark's estimated total return of (32.10)% by 4.50%, primarily due to interest and dividend income offsetting expenses.
• The fund successfully met its tracking objective, with the average daily change in UNG's NAV for the 30-valuation days ended December 31, 2025, being (0.421)% compared to the Benchmark Futures Contract's (0.430)%, a difference of 0.009% (0.9 basis points) within the +/10% goal.
• Average daily total net assets for 2025 were $520,276,584, a decrease from $815,383,013 in 2024.
• Dividend and interest income earned on collateral holdings decreased to $19,329,746 in 2025 from $38,655,139 in 2024, resulting in a lower annualized yield of 3.72% (vs. 4.74% in 2024).
• Total expenses, excluding management fees, decreased to $2,979,297 in 2025 from $5,230,444 in 2024, mainly due to lower brokerage commissions and tax reporting/professional fees.
• UNG held 11,783 NYMEX natural gas Futures NG contracts as of December 31, 2025, and exceeded NYMEX accountability levels (maximum of 16,693 contracts vs. 12,000 all-month limit) during the year, though no action was taken.
• A 1-for-4 reverse share split was effected on January 23, 2024, retroactively adjusted in financial statements.
• The natural gas futures market experienced both contango and backwardation during 2025, with prices ranging from $2.696 to $5.289 per MMBtu.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with a slightly negative sentiment. While UNG technically outperformed its complex benchmark's *expected* total return and met its tracking objective, the significant 27.60% decline in NAV for the year is a substantial negative for investors. The fund operates in a volatile commodity market, and the inherent risks of contango/backwardation continue to impact returns, even with effective management.

Positives

• UNG successfully met its investment objective of tracking the daily percentage changes of its benchmark, with the average daily change in NAV for the 30-valuation days ended December 31, 2025, being within 0.9 basis points of the Benchmark Futures Contract.
• UNG's actual total return of (27.60)% for 2025 outperformed its benchmark's estimated total return of (32.10)% by 4.50%, indicating effective management of expenses and income relative to the benchmark's roll yield.
• Total fees and other expenses (excluding management fees) decreased in 2025, primarily due to lower brokerage commissions from reduced trading volume.
• The fund has an unlimited number of shares available for issuance through Creation Baskets, providing flexibility for capital inflows.

Negatives

• UNG's per share NAV experienced a significant decrease of 27.60% for the year ended December 31, 2025, resulting in a negative total return for investors.
• The nominal price of the Benchmark Futures Contract increased by 1.46% in 2025, indicating a substantial divergence between the fund's NAV performance and the underlying commodity's nominal price movement.
• Dividend and interest income decreased by nearly 50% in 2025 compared to 2024, contributing to a lower annualized yield.
• UNG exceeded NYMEX accountability levels for natural gas futures contracts during 2025, holding a maximum of 16,693 contracts against an all-month limit of 12,000, which could potentially lead to regulatory scrutiny or forced position reductions.
• The natural gas market experienced significant price volatility throughout 2025, with prices ranging from $2.696 to $5.289 per MMBtu, posing inherent risks to the fund's performance.

Risks

• The NAV of UNG's shares relates directly to the value of the Benchmark Futures Contracts and other assets held by UNG, and fluctuations in these prices could materially adversely affect an investment.
• Price volatility in the natural gas market, influenced by economic conditions, weather, geopolitical conflicts (e.g., Russia-Ukraine war, Middle East conflicts), and supply/demand factors, may cause a total loss of investment.
• Natural disasters, public health disruptions (e.g., COVID-19 pandemic), and international armed conflicts could impact commodity prices and the value, pricing, and liquidity of UNG investments.
• Historical performance of UNG and the Benchmark Futures Contract is not indicative of future performance.
• An investment in UNG may provide little or no diversification benefits, as its performance may not be non-correlated to other asset classes in all periods.
• The market price at which investors buy or sell shares may be significantly less or more than NAV due to supply/demand forces and non-concurrent trading hours between NYSE Arca and futures exchanges.
• Daily percentage changes in UNG's NAV may not perfectly correlate with daily percentage changes in the Benchmark Futures Contract due to market disruptions, position limits, or investment in Other Natural Gas-Related Investments.
• Daily percentage changes in the price of the Benchmark Futures Contract may not correlate with daily percentage changes in the spot price of natural gas.
• Natural market forces like contango and backwardation may increase tracking error and negatively impact total return, as rolling futures contracts can incur costs or benefits depending on the market structure.
• Accountability levels, position limits, and daily price fluctuation limits set by exchanges (e.g., NYMEX, ICE Futures, CFTC's Position Limits Rule) can limit UNG's investments and cause tracking error.
• Risk mitigation measures imposed by UNG's Futures Commission Merchants (FCMs) could limit UNG's ability to fully invest in the Benchmark Futures Contract, leading to tracking error.
• An investor's tax liability may exceed the amount of distributions, as UNG does not intend to make cash distributions.
• An investor's allocable share of taxable income or loss may differ from its economic income or loss due to tax accounting assumptions and conventions.
• UNG could be treated as a corporation for U.S. federal income tax purposes if the IRS challenges its partnership classification, substantially reducing share value.
• UNG is subject to credit risk with respect to counterparties to OTC contracts, including the risk of non-performance.
• Valuing OTC derivatives may be less certain than valuing exchange-traded instruments due to individual negotiation and lack of active markets.
• UNG's rights under an OTC contract may be restricted by regulations, potentially affecting its ability to terminate contracts or exercise default rights.
• UNG could become leveraged if it holds insufficient assets to meet current and future margin or collateral requirements.
• UNG may temporarily limit the offering of Creation Baskets, which could cause its NAV to differ materially from its trading price and increase trading costs for investors.
• Certain of UNG's investments could be illiquid, leading to large losses if positions cannot be liquidated at desired prices.
• UNG is not actively managed by conventional methods, meaning it will not close out declining positions except under specific conditions.
• UNG may not meet NYSE Arca listing standards, or trading in its shares may be halted, adversely impacting an investor's ability to sell shares.
• The liquidity of UNG's shares may be affected by the withdrawal of Authorized Participants.
• Limited partners and shareholders do not participate in the management of UNG or control USCF.
• There is a risk that UNG will not earn trading gains sufficient to compensate for its fees and expenses.
• UNG is subject to extensive regulatory reporting and compliance, and regulatory changes could significantly and adversely affect it.
• UNG is not a registered investment company, so shareholders do not have the protections of the 1940 Act.
• Trading in international markets could expose UNG to credit and regulatory risk due to differing regulations and potential exchange-rate movements.
• UNG and USCF may have conflicts of interest, potentially favoring their own interests.
• UNG could terminate at any time, causing liquidation and potential loss of investment.
• An unanticipated number of Redemption Basket requests could have an adverse effect on UNG's NAV.
• UNG may be subject to interest rate risk, where fixed income securities fluctuate in value due to interest rate changes, potentially leading to losses.
• UNG may potentially lose money by investing in government money market funds, as their value is not guaranteed.
• The failure or bankruptcy of a clearing broker or UNG's Custodian could result in a substantial loss of UNG's assets.
• Competing claims of intellectual property rights may adversely affect UNG.
• Intentional and unintentional cyber-attacks pose operational and information security risks.
• UNG's investment returns could be negatively affected by climate change and greenhouse gas restrictions.
• USCF is the subject of class action, derivative, and other litigation, which could materially adversely affect its financial condition and divert management's attention.

Future Outlook

UNG anticipates that interest rates may continue to stagnate in the near future, and that fees and expenses paid by UNG may continue to be lower than interest earned, potentially leading to UNG outperforming its benchmark. The fund expects increasing demand for LNG and new export facilities, along with potential new demand for natural gas to power AI data centers, to influence natural gas prices. While domestic supply and demand are likely to remain dominant long-term influences, international demand and extraordinary international events will have a growing impact on price volatility and direction.

Management Comments

• USCF believes that market arbitrage opportunities cause daily changes in UNG's share price on the NYSE Arca on a percentage basis to closely track daily changes in UNG's per share NAV on a percentage basis.
• USCF further believes that the daily changes in prices of the Benchmark Futures Contract have historically tracked the daily changes in the spot price of natural gas.
• USCF believes that the net effect of these relationships will be the daily changes in the price of UNG's shares on NYSE Arca on a percentage basis will closely track the daily changes in the spot price of natural gas on a percentage basis, plus interest earned on UNG's collateral holdings, less UNG's expenses.
• USCF believes that it is not practical to manage the portfolio to achieve an investment goal where its NAV or market price equals the spot price of natural gas or any particular futures contract over a period greater than one day.
• USCF anticipates that interest rates may continue to stagnate over the near future. It is anticipated that fees and expenses paid by UNG may continue to be lower than interest earned by UNG. As such, USCF anticipates that UNG could possibly outperform its benchmark so long as interest earned is greater than the fees and expenses paid by UNG.

Industry Context

StockSavvy.ai notes that the natural gas market remains highly sensitive to global geopolitical events, as evidenced by the Russia-Ukraine war's impact on European supply-demand dynamics and global prices, with Russia cutting off supply to Europe entirely at the start of 2025. The increasing demand for Liquid Natural Gas (LNG) and the development of new export facilities, alongside emerging demand from AI data centers, are expected to exert upward pressure on natural gas prices. However, the robust domestic U.S. energy industry's ability to meet demand could temper price increases, except during periods of extreme temperatures. The Federal Reserve's interest rate adjustments in response to inflation, which remains above the 2% target, also influence the broader economic environment affecting commodity markets. Furthermore, climate change policies and regulations are identified as potential long-term headwinds for the oil and gas sector, which could impact UNG's investment returns.

Comparison to Industry Standards

• Over the ten-year period ended December 31, 2025, natural gas prices showed low positive correlation (0.110) with large cap U.S. equities (S&P 500) and very low positive correlation (0.057) with global equities (FTSE World Index), suggesting limited diversification benefits against these asset classes.
• Natural gas prices exhibited a low negative correlation (-0.123) with U.S. Government Bonds (BEUSG4 Index) over the same ten-year period.
• Correlations between natural gas and other energy commodities (crude oil, heating oil, unleaded gasoline) were very low positive (0.003 to 0.050) over the ten-year period, indicating that natural gas price movements were largely independent of these other fuels on a long-term basis.
• For the more recent one-year period ended December 31, 2025, natural gas showed a low negative correlation (-0.102) with large cap U.S. equities and a low negative correlation (-0.219) with global equities, while showing a moderate positive correlation (0.265) with U.S. Government Bonds.
• The one-year correlations with other energy commodities (crude oil: 0.151, heating oil: 0.201, unleaded gasoline: 0.193) were low positive, indicating some, but not strong, co-movement.

Management Changes

Corporate Governance

Legal Proceedings

• RBC Capital Markets LLC settled various legal proceedings, including LIBOR class actions ($101M, $3.45M, $1.91M settlements), an SEC investigation for records preservation ($45M settlement), and a FINRA disciplinary action ($375,000 fine, $393,833.50 restitution).
• Royal Bank of Canada Trust Company (Bahamas) Limited was convicted in France on March 5, 2024, for complicity in estate tax fraud, leading to a fine and joint liability for unpaid taxes, with an appeal pending.
• Marex Capital Markets, Inc. was involved in several litigations, including a private litigation where a judgment of $1,762,266.57 plus fees was entered in its favor, and a FINRA arbitration where claims against it were dismissed.
• Macquarie Bank Limited was ordered to pay a $10 million penalty by the Federal Court of Australia for failing to prevent unauthorized fee transactions and a $4,995,000 penalty by ASIC for suspicious electricity futures orders, with additional license conditions imposed.
• Société Générale S.A. is defending ongoing civil proceedings related to LIBOR manipulation, foreign exchange trading, and was fined $1.5 million by the CFTC for swap dealer compliance failures and $75 million by the CFTC for recordkeeping and supervision failures.
• The Bank of Nova Scotia settled charges with the CFTC and SEC for recordkeeping and supervision failures ($15M to CFTC, $7.5M to SEC) and was fined $42 million by the CFTC (plus disgorgement and restitution) for spoofing in gold and silver futures markets, with a parallel DOJ deferred prosecution agreement.
• USCF and USO settled SEC and CFTC investigations related to disclosures during extraordinary market conditions in 2020, resulting in $2.5 million in civil monetary penalties and cease-and-desist orders.
• Class action and derivative litigations against USCF and USO (e.g., In re: United States Oil Fund, LP Securities Litigation) are ongoing, with a motion to dismiss granted without prejudice in one case and a motion to amend pending.

Related Party Transactions

• UNG pays USCF a management fee of 0.60% per annum of average daily total net assets of $1,000,000,000 or less, and 0.50% for assets above $1,000,000,000.
• USCF pays the fees of ALPS Distributors, Inc. (Marketing Agent) and The Bank of New York Mellon (Administrator, Custodian, Transfer Agent).
• UNG pays a licensing fee to the NYMEX (0.015% on all net assets) under an agreement with USCF.
• UNG pays its portion of the directors and officers liability insurance for UNG and the Related Public Funds and the fees and expenses of the independent directors of USCF.

Stakeholder Impact

• Shareholders experienced a significant decline in NAV, indicating a negative impact on investment value, although the fund's tracking performance relative to its benchmark's expected return was positive.
• Authorized Participants benefit from a reduced transaction fee for creating and redeeming baskets, potentially improving arbitrage opportunities and market efficiency.
• USCF, as the general partner, continues to receive management fees, but its financial condition is subject to ongoing litigation related to other funds it manages, which could indirectly affect UNG.
• FCMs and swap counterparties face ongoing regulatory scrutiny and significant penalties for various compliance failures, which could impact their ability to serve UNG or increase costs for such services.
• The natural gas industry faces evolving market dynamics from geopolitical events, LNG demand, AI data centers, and climate change regulations, which will influence the underlying asset UNG tracks.

Next Steps

• USCF will continue to manage UNG's portfolio to track the daily percentage changes of the Benchmark Futures Contract.
• USCF will monitor market conditions, regulatory requirements, and risk mitigation measures to determine investment strategies, potentially including investments in Other Natural Gas-Related Investments if position limits are approached or market conditions dictate.
• The ongoing litigation involving USCF and its service providers will continue to be contested or resolved.

Key Dates

Recommendation

UNG's primary objective is to track the daily percentage changes of its natural gas futures benchmark, not the nominal spot price. While the fund's NAV experienced a significant decline of 27.60% in 2025, it actually outperformed its *expected* benchmark return (which accounts for the costs of rolling futures contracts, like contango) by 4.50%. This indicates the fund is performing as designed relative to its specific, complex investment objective. For investors seeking indirect exposure to natural gas, particularly those aware of the nuances of futures markets (contango/backwardation), holding UNG aligns with its intended purpose. However, new investors should be acutely aware of the inherent volatility of natural gas prices and the potential for significant NAV declines, as demonstrated in 2025, and understand that the fund's performance may diverge substantially from nominal spot price movements.

Keywords

Natural Gas Futures, Commodity Pool, UNG, NYSE Arca, Henry Hub, Futures Contracts, OTC Swaps, Contango, Backwardation, Tracking Error, SEC Filing, 10-K, USCF, Energy ETF, Commodity Trading