Natural gas ETFs

Find out what a natural gas ETF is, the potential risks involved and how you can invest in one.

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Commonly asked questions See FAQs

Gas price volatility has been a feature of the post-pandemic recovery, as soaring demand has collided with supply interruptions. It has been a reminder of the various different forces that weigh on gas prices – from growing demand in Asia, to infrastructure problems across Europe, to the decarbonisation of the global economy. For investors keen to participate in this volatile and multi-faceted market, natural gas ETFs are an option.

What is natural gas?

Natural gas is a source of energy of power, for heating, fuel, and electricity generation. It also has a role in manufacturing. The price of natural gas rises and falls according to fluctuations in supply and demand. The four largest suppliers of natural gas are the US, Russia, Iran and Canada, while the largest consumers of natural gas are the US, China, Iran and Canada.

How do natural gas ETFs work?

There aren’t many natural gas ETFs and most of them are listed in the US market. Most of the natural gas ETFs gain exposure to natural gas prices through futures contacts, rather than via stocks of natural gas companies. Many will track the Bloomberg Natural Gas Subindex, the main benchmark index for this area.

The natural gas ETFs will give exposure to range of futures contracts, diversifying across different maturities, with the aim of holding multiple options to help manage risk.

Which are the best natural gas ETFs?

Top three by five year performance – Source: ETF Database to 1 November 2021:

Fund name (Ticker)5 year performance1 year performance (to 1 November 2021)Link to invest
United States 12 Month Natural Gas Fund LP36.42%57.08%Invest now
United States Natural Gas Fund LP-44.73%%47.09%Invest now
ProShares UltraShort Bloomberg Natural Gas-78.78%-76.17%Invest now

How to invest in natural gas ETFs

Natural gas ETFs trade on exchange like a normal share. As such, investors can buy them through a platform or broker.

It is worth considering that an investment in natural gas is very concentrated. Natural gas is subject to a range of market forces and everything from a pipeline problem to adverse weather conditions can influence the price. The recent volatility in prices has been created by both supply and demand problems and shows the complexities of understanding the market.

In selecting the right natural gas ETF, investors need to consider how closely it tracks natural gas prices and the cost of the ETF. Other options would be a diversified energy ETF or, more broadly, a commodities ETF.

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Bottom line

The natural gas market is volatile and is subject to a broad range of different forces. The price can be influenced by supply problems, such as pipeline disruptions or political uncertainty, but also by demand considerations, as has been seen as the world has emerged from the pandemic. A natural gas ETF is one of the few ways to get pure exposure to the natural gas market. If you’re unsure which provider best suits your investment goals, you can compare the features from a range of platforms that let you buy ETFs in the UK.

Frequently asked questions

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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