United States 12 Month Natural Gas Fund, LP (UNL)
The United States 12 Month Natural Gas Fund, LP — ticker UNL — is a fund that holds natural gas futures contracts set to expire around 12 months in the future. Rather than owning physical natural gas or trading volatile short-term contracts, unitholders effectively own a slice of a long-dated futures position that gradually rolls forward. The fund aims to let investors bet on natural gas prices — believing they will rise or fall — without navigating the complexity of the futures markets themselves.
Natural gas prices fluctuate based on supply, demand, weather, geopolitics, and energy market dynamics, and investors have long sought ways to gain exposure to those price movements. For decades, the only practical route was to trade NYMEX natural gas futures on the Chicago Mercantile Exchange, a venue that requires a futures account and daily margin management. The United States 12 Month Natural Gas Fund was created to provide a simpler entry point: buy UNL shares on a stock exchange, and you gain exposure to natural gas prices through a managed fund rather than a brokerage account.
The mechanics are straightforward in concept but elaborate in execution. The fund continuously holds a portfolio of NYMEX natural gas futures contracts, but specifically contracts that expire roughly 12 months into the future. The reason for this structure is to avoid the extreme volatility and contango effects of near-term contracts. Contracts expiring next month see wild swings as delivery approaches, and when prices are in contango (future contracts cost more than spot), holding near-term contracts is an expensive strategy. By holding contracts 12 months out, the fund gains broad exposure to the long-term expectation of natural gas prices while sidestepping the day-to-day noise of the contract month closest to delivery.
The fund management team carries out a rolling process: as the current 12-month contract approaches expiration and enters the final month, they sell it and simultaneously buy a new contract expiring 12 months further out. This “rolling” keeps the fund continuously at the same relative distance from delivery — always holding contracts maturing roughly a year away. An investor in UNL is therefore not making a bet on a specific contract month but on the broad price level of natural gas over a rolling, long-term horizon.
One of the core economic questions for any commodity fund is the cost of rolling, particularly when markets are in contango. Contango occurs when longer-dated contracts are more expensive than nearer-dated ones, reflecting storage costs, convenience yield, and the cost of financing inventory. When the fund rolls — selling the old contract and buying the new, more expensive one — it realizes a loss on the roll. Over the course of a year, this can compound significantly. In extreme contango markets, rolling costs can erase the entirety of a modestly bullish price move, leaving unitholders with losses despite higher absolute prices. Conversely, in backwardated markets, where future contracts are cheaper than near-term ones, rolling produces a gain, and the fund benefits from both price appreciation and roll yield. The fund charges an annual fee (typically around 0.65% to 1% of assets) to cover management and administrative costs, a fee that must be deducted from any gains the fund produces.
Natural gas prices are volatile and driven by many factors. Winter demand for heating can spike prices sharply, and a mild winter can see prices collapse. The shale gas revolution in the United States transformed domestic supply, making the country far less dependent on imports and increasing supply flexibility. Hurricane season in the Gulf of Mexico threatens production and refining capacity, producing sudden price spikes. Geopolitical events, crude oil prices (to which natural gas can be loosely correlated), and electricity demand all influence the fundamental supply-demand balance. For investors, these drivers create opportunity but also risk — a single unexpected event, like an unusually warm winter or a production disruption, can move natural gas prices sharply.
The investor profile for UNL tends to fall into a few categories. Some are bullish on natural gas as an energy source — believing demand will rise as the world needs more electricity and cleaner fuel sources. Others use UNL as a hedge against other positions; for instance, a utility company that supplies natural gas to customers might use UNL as a counterbalance if it holds other energy assets or if regulatory concerns make it prudent to be long natural gas. Still others simply view UNL as a commodity speculation, betting that the price of natural gas will appreciate over a period of months or years based on their reading of supply-demand dynamics.
The primary risk is directional: if natural gas prices fall, UNL will decline, and investors will lose principal. Secondary risks include contango drag, which silently erodes returns in certain market structures, and the fund’s exposure to roll risk — the moment each month when old contracts are sold and new ones purchased is a moment of vulnerability if liquidity evaporates or if the price differential between contracts widens unexpectedly. The fund also cannot own physical natural gas, so it is purely a financial position; an investor cannot take delivery of the actual commodity and must exit by selling shares if they wish to realise any gains or losses.
For someone researching UNL, the starting point is the price history of NYMEX natural gas futures and the current term structure — the prices of contracts expiring at different points in the future. A steep contango suggests rolling costs will be a significant drag, while backwardation suggests roll yields will help. Watch natural gas inventories, which are reported weekly by the US Energy Information Administration, and pay attention to weather patterns and seasonal demand shifts. The fund’s holdings and performance are disclosed in monthly fact sheets and SEC filings (CIK 0001405513). The central question for any investor is whether they believe natural gas prices will rise, and whether they believe that conviction is worth the friction costs, volatility, and daily price swings that come with commodity investing.