10-Q: US Natural Gas Fund NAV Declines Amidst Market Volatility

The United States Natural Gas Fund, LP reported a decrease in Net Asset Value per share for the quarter ended June 30, 2026, reflecting natural gas price fluctuations and operational expenses.

Summary

• The United States Natural Gas Fund, LP (UNG) reported a Net Asset Value (NAV) per share of $11.78 as of June 30, 2026, down from $12.20 at the end of 2025.
• For the six months ended June 30, 2026, UNG reported a net loss of $0.42 per share, compared to a net loss of $1.54 per share for the same period in 2025.
• Total income for the six months ended June 30, 2026, was $128,040,638, a significant increase from $89,459,563 in the prior year period, driven by gains on futures and swap contracts.
• Total expenses for the six months ended June 30, 2026, were $2,953,492, a slight decrease from $3,058,645 in the prior year period.
• The fund's investment objective is to have its shares' daily percentage changes in NAV reflect the daily percentage changes in the price of natural gas delivered at the Henry Hub, Louisiana.
• UNG exceeded accountability levels of the NYMEX during the six months ended June 30, 2026, holding a maximum of 24,907 Natural Gas Futures NG contracts, exceeding the any month limit, though no action was taken by the NYMEX.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a neutral to slightly negative sentiment due to the fund's NAV declining and the ongoing challenges of tracking the benchmark, despite some positive operational income.

Positives

• Total income for the six months ended June 30, 2026, increased to $128,040,638 from $89,459,563 in the prior year period, primarily due to gains on trading of commodity futures and swap contracts.
• The fund's average daily percentage change in NAV (0.170%) was within the target range of +/- 10% of the Benchmark Futures Contract's average daily change (0.163%) for the 30-valuation days ended June 30, 2026.
• Interest and dividend income earned on cash and equivalents was $7,886,666 for the six months ended June 30, 2026, with an annualized yield of 3.25%.

Negatives

• The Net Asset Value (NAV) per share decreased from $12.20 at December 31, 2025, to $11.78 at June 30, 2026.
• The fund reported a net loss of $0.42 per share for the six months ended June 30, 2026, compared to a net loss of $1.54 per share for the same period in 2025.
• The fund exceeded NYMEX accountability levels for natural gas futures contracts during the six months ended June 30, 2026, holding up to 24,907 contracts.
• The fund's total return for the six months ended June 30, 2026, was (3.44)%, compared to an estimated benchmark return of (4.25)%, indicating underperformance relative to the benchmark's potential return.

Risks

• Market volatility in natural gas prices can significantly impact the fund's NAV and share price.
• The fund is exposed to commodity price risk through its holdings of Futures Contracts and other derivatives.
• Counterparty credit risk exists for OTC swap contracts, where the other party may not be able to fulfill its obligations.
• The fund's investment objective may be impacted by regulatory limitations, such as position limits and accountability levels on futures exchanges.
• Contango and backwardation in the natural gas futures market can affect the total return of the fund.
• The fund may lose money by investing in government money market funds, as these are not insured or guaranteed.
• Geopolitical conflicts, natural disasters, and public health disruptions can cause volatility in commodity prices and impact the fund's investments.
• Interest rate risk may affect the value of fixed income securities held by the fund.

Future Outlook

The fund's investment objective is to track the daily percentage changes in the price of natural gas. Management anticipates that interest rates may continue to stagnate, and expects fees and expenses to be lower than interest earned, potentially allowing the fund to outperform its benchmark.

Management Comments

• USCF believes that market arbitrage opportunities will 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 believes that daily changes in prices of the Benchmark Futures Contract have historically closely tracked the daily changes in spot prices of natural gas.
• Investors should be aware that UNG's investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of natural gas or any particular futures contract based on natural gas, nor is UNG's investment objective for the percentage change in its NAV to reflect the percentage change of the price of any particular futures contract as measured over a time period greater than one day.
• UNG may be subject to interest rate risk, which may prevent UNG from investing fully at prevailing rates until any current investments in Treasuries mature in order to avoid selling those investments at a loss.

Industry Context

StockSavvy.ai notes that the natural gas market remains subject to significant volatility driven by supply/demand dynamics, geopolitical events, and seasonal factors. The fund's performance is directly tied to these fluctuations and its ability to manage tracking error against the benchmark futures contract.

Comparison to Industry Standards

• The fund aims to track the daily percentage changes in the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the near-month futures contract on NYMEX.
• The fund's tracking goal is to maintain average daily percentage changes in NAV within +/- 10% of the benchmark futures contract over 30-day periods.
• For the 30-valuation days ended June 30, 2026, the average daily change in the Benchmark Futures Contract was 0.163%, while the average daily change in UNG's NAV was 0.170%, staying within the target range.
• Over the long term (since April 18, 2007), the average daily change in the Benchmark Futures Contract was (0.078)%, and UNG's NAV was (0.077)%, also within the target range.

Legal Proceedings

• Optimum Strategies Action: Claims dismissed with prejudice by the court.
• Settlement of SEC and CFTC Investigations: USCF and USO settled with SEC and CFTC, paying $2.5 million in aggregate civil monetary penalties.
• In re: United States Oil Fund, LP Securities Litigation: A consolidated class action where defendants have moved for dismissal; plaintiff has filed a motion for leave to file a second consolidated amended complaint.
• Mehan Action: A derivative action stayed pending disposition of motions in the related securities litigation.
• In re United States Oil Fund, LP Derivative Litigation: Two derivative actions consolidated and stayed pending disposition of motions in the related securities litigation.

Related Party Transactions

• USCF Management Fee: Paid monthly as a percentage of average daily total net assets (0.60% for NAV <= $1 billion, 0.50% for NAV > $1 billion).
• Marketing Agent Agreement: Fee equal to 0.025% of UNG's total net assets, paid by USCF.
• BNY Mellon Services: USCF pays fees for custodial, administrative, accounting, and transfer agency services.
• NYMEX Licensing Agreement: UNG pays an asset-based fee (0.015% on net assets) for license to use settlement prices and service marks.

Stakeholder Impact

• Shareholders: NAV per share decreased, impacting the value of their investment. The fund's performance is directly tied to natural gas price movements.
• Authorized Participants: Continue to facilitate creation and redemption of baskets, paying a $350 transaction fee per order.
• General Partner (USCF): Receives management fees based on AUM and is responsible for arranging various services.
• Regulators (SEC, CFTC): The fund operates under their oversight and has settled investigations with them.

Next Steps

• Continue to manage the portfolio to ensure daily changes in NAV percentage terms closely track daily changes in the price of the Benchmark Futures Contract.
• Monitor market conditions, regulatory requirements, and risk mitigation measures that could impact the fund's ability to meet its investment objective.
• Publish monthly account statements including Statement of Income (Loss) and Statement of Changes in Net Asset Value.

Key Dates

Recommendation

The fund's performance is directly tied to the volatile natural gas market and its ability to track its benchmark. While income has improved and the fund is meeting its tracking objective, the decline in NAV and the inherent risks of commodity futures investing suggest a 'hold' position for existing investors, with caution for new investors.

Keywords

natural gas futures, commodity pool, NYMEX, Henry Hub, contango, backwardation, OTC swaps, benchmark futures contract