Last week, the natural gas sector performed exceptionally well among the top 10 US stock ETFs by growth. The ProShares Ultra Bloomberg Natural Gas ETF led the pack with a weekly gain of 31.26%, while the US Natural Gas ETF ranked fourth with a 18.15% increase. According to BTIG analyst Jonathan Krinsky in a report, the strong performance of natural gas stocks has propelled the energy sector from being the "worst performer to the best," as commodity prices rebound from multi-year lows, and natural gas stocks show "clear leadership." To date, the First Trust Natural Gas ETF has risen 3.8% in 2025, outperforming the overall energy index of the S&P 500. The significant rise in US natural gas ETFs can be attributed to the following factors:

Demand Factors

1.  AI Demand Driving Data Center Power Consumption

With the rapid development of artificial intelligence (AI), the electricity demand for data centers is expected to increase by 10% to 15% annually. Data centers are energy-intensive, and the demand for natural gas and other energy sources will directly impact their power supply. In the energy transition, natural gas, with its relatively low carbon emissions, has become the preferred energy source for many power generation companies, providing long-term support for natural gas demand. As AI and data center demand grow, natural gas demand is expected to continue rising, which in turn supports the growth of natural gas ETFs.

2.  Cold Weather Increasing Heating Demand

During the colder months, the US and other northern hemisphere regions typically see a surge in natural gas demand, mainly for heating. The expectation of cold weather has heightened market concerns about increased natural gas demand, particularly during the winter heating season. Weather forecasts often influence market expectations of natural gas demand, and if the winter is unusually cold, it could lead to further increases in natural gas demand, driving up prices.

3.  Russian-Ukrainian Conflict and Natural Gas Supply Uncertainty

Due to the Russia-Ukraine conflict, Europe has gradually reduced its dependence on Russian natural gas, facing tightening energy supply conditions. This situation has led to a rise in US liquefied natural gas (LNG) exports. US LNG exports are expected to grow by 15% in 2024. Increased demand from Europe for US LNG has intensified global supply pressures, driving up natural gas prices. This global supply-demand imbalance has also affected the US natural gas market, indirectly driving up natural gas ETF prices.

4.  Trump's New Government Potentially Relaxing Energy Sector Regulations

There is an expectation that the Trump administration may relax regulations on the energy sector, especially in the natural gas and oil industries. This policy outlook has boosted market optimism about future growth in the energy sector, which could encourage investors to increase their investments in natural gas ETFs, further driving up the prices of these funds.

Supply Factors

1.  Declining Natural Gas Inventories

According to data from the US Energy Information Administration (EIA), natural gas inventories have recently decreased, leading to tighter supply. This signals a supply bottleneck, particularly as the cold winter season approaches. The drop in inventories raises concerns about supply shortages, and lower inventories generally lead to higher prices, especially when demand spikes. The tightness in supply has a direct impact on natural gas ETF performance.

2.  Supply Chain Bottlenecks

Supply chain issues, such as delays in transportation and distribution, extreme weather, and other factors, could also exacerbate the natural gas supply crunch, driving up prices. Additionally, the production and transportation of natural gas are subject to various factors, including weather, technology, and political conditions. When supply shortages occur, prices can rise sharply.

Comprehensive Analysis

The recent surge in natural gas ETFs is driven by both increased demand and supply tightening. On the demand side, factors such as the widespread application of AI, the onset of cold weather, the uncertainty surrounding energy supplies due to the Russia-Ukraine conflict, and potential regulatory relaxations have all contributed to rising expectations of natural gas demand. On the supply side, declining natural gas inventories and escalating supply chain bottlenecks have further intensified market concerns about insufficient supply. These factors combined have driven up natural gas prices, which in turn has propelled natural gas ETF prices higher.

In summary, the rise of natural gas ETFs is a result of both seasonal and policy-driven factors, reflecting the changing global energy market dynamics. Investor expectations and concerns about supply chain issues have led to significant volatility and growth in natural gas ETFs.