To begin with, I post daily analysis about the market and all my trades through my blog at www.briskycapital.blogspot.com, so you can find many posts about UNG there. 

Basically, when you look at the commodities complex, crude oil and natural gas aren't really that similar.  People try to compare the two with ratios, and because of the depressed price of natural gas, those ratios point to major buy signals for UNG.  But for U.S. purposes, natural gas is basically a domestic product.  We have to import a high percentage of our crude oil, so crude prices are at the mercy of many more factors (geopolitical, global economy etc.).  That's why I don't really compare the two.

To me, natural gas is a valuable commodity for a couple of reasons, and here are the biggest two:

1)Its domestic

2)Its cleaner than many other options, most specifically coal.

Natural gas can be used for power generation and even for transportation fuels.  Our lovely leaders in Washington are just starting to figure this out, but only with the help of people like Boone Pickens.  So to me, we have a commodity with a huge potential range of uses, many of which are just on the verge of being developed into the mainstream.

But that doesn't tell us anything about natural gas prices.  Here's the deal there... 

Prices are low right now because supply outweighs demand. That's basically it right now.  When energy prices skyrocketed in the past five years, everyone was trying to produce more oil and gas.  Gas wells were popping up everywhere because they were profitable.  Also, due to new drilling technology, we can drill for gas in new ways and in new areas which can yield vast new sums of the commodity (I don't need to get in all the specifics there, but trust me, its happening).  So we have production up, which worked great for awhile, but then the recession hit.  We were ready with all this natural gas coming available and demand slowed big time. 

During the recession. the producers realized the excess supply would drop gas prices, and it would be much harder for them to make money.  So, they started shutting off wells.  As it sits right now, we're down about 50% in the amount of wells vs. last year.  They are trying to allow demand to catch up to supply.  It still has not, but its getting closer. 

Now we have a couple of potential catalysts that could drive prices higher:

 1)Hurricanes, which can really disrupt production if they hit the wrong areas; could really disrupt production.

 2)The economy recovering, which the market is now starting to price in.

If either of these happened, we could actually see another gas spike because you'd take already lowered production numbers and add in an unexpected factor like a hurricane and prices could move quickly.

The UNG ETF is both good and bad.  Its good because it gives investors direct access to trade natural gas, which many people like to do, without actually trading commodity contracts.  But, the demand for the fund is crazy, and it makes it very volatile.  So much so that its actually controlling the market for the commodies themselves (USO is the same thing but oil).  So it keep you on your toes and gives you something else to worry about. 

To me, the upside outweighs the downside, by quite a bit, and in the end, thats what investing comes down to.  You look at various scenarios and "if this happens, what happens to my investment."  UNG isn't perfect, and doesn't come without risks, but to me, I feel this is something that will turn out well.

You can email questions or comments to briskycapital@gmail.com, or go ahead and comment here or on my blog.  You can follow my real time updates via twitter as well @ www.twitter.com/briskycapital.

Thanks!