Qatar Crisis Won’t Save United States Natural Gas Fund, LP (NYSEARCA:UNG)

Qatar isn’t falling yet

Few countries are as well protected from siege as Qatar. Not only does the nation have wide access to a body of water split between two major rivals, it also has a huge source of trade revenue in its gas exports. To top it all off, the country is home to a giant American military base. That, to at least some extent, protects its citizens from a a sudden attack by another state actor.

For those reasons, and the behavior of the actors in the crisis so far, few expect the kingdom to fold. Instead the consensus view appears to be that the crisis will continue until Qatar offers its gulf rivals some sort of settlement. Until then the country will be allowed to carry out its business as it has been thus far.

The consensus view, especially in Geopolitics, is often wrong. That’s a reason for traders not to take the risk out of the gas market just yet. On Tuesday morning the country aid that it will not engage in dialogue until after the blockade is lifted. That signals, at the very least, some support for the consensus view in the short to medium term.

Betting on the United States Natural Gas Fund, LP (NYSEARCA:UNG)

The United States Natural Gas Fund, LP (NYSEARCA:UNG) has lost more than 10 percent of its value in the last three months. Over the last five years it has lost more than two thirds of its value. It’s not one of those dangerous gas ETFs that tries to multiply daily returns. Instead, it tracks US spot prices.

In a recent report RBC Capital Markets’ Christopher Louney concluded that Qatar’s effect on the market may be to keep US capacity from expanding. In order to export gas the US would need to invest billions into both ships and liquification plants.

This impact may be a strategic goal, or simply incidental, to Qatar’s plans. On thing is certain, however. Oil has become somewhat less vulnerable to geopolitical risks as fracking has become widespread. If the same process doesn’t pull gas market share from the middle east expect instability in the United States Natural Gas Fund, LP (NYSEARCA:UNG).