Natural Gas ETFs Surge While Crude Struggles

Last week, U.S. energy markets saw a sharp divergence, with natural gas prices surging while crude oil extended its decline. Despite ongoing geopolitical risks, including U.S. sanctions on Iran and supply shifts from Saudi Arabia and Russia, oil struggled to gain momentum, highlighting the contrasting trends in the two energy markets.

Natural Gas Prices Rally Amid Strong Storage Draw and Rising LNG Demand

U.S. natural gas futures rose above $3.35/MMBtu, fueled by a larger-than-anticipated withdrawal from storage. The Energy Information Administration (EIA) reported a 174 billion cubic feet (bcf) draw for the week ending January 31, surpassing analysts’ expectations of 168 bcf. This decline also significantly exceeded last year’s 110 bcf pull and aligned with the five-year average.

Further support for natural gas prices came from increased liquefied natural gas (LNG) exports, with flows to export facilities averaging 14.9 billion cubic feet per day (bcfd) in early February. This represents a rise from 14.6 bcfd in January and sets a new record, surpassing the previous peak of 14.7 bcfd from December 2023. Additionally, forecasts predict colder-than-normal temperatures in the U.S. between February 10-14, which could further boost heating demand and sustain upward momentum for natural gas prices.

Crude Oil Declines for a Third Consecutive Week

In contrast, WTI crude oil futures hovered near $71 per barrel on Friday, marking their third consecutive weekly drop. A major factor behind this downturn was President Donald Trump’s commitment to expanding U.S. oil production, with the objective of keeping crude prices under control.

Market sentiment was further pressured by rising U.S. crude inventories, with stockpiles posting their largest increase in nearly a year. However, downside risks were somewhat limited by geopolitical tensions. The U.S. tightened sanctions on Iran, which could restrict its oil exports, while Saudi Aramco sharply raised crude prices for March deliveries, citing stronger demand from China and India as well as ongoing supply disruptions in Russia.

At the same time, U.S.-China trade tensions intensified after Beijing imposed tariffs on American oil, LNG, and coal in response to Trump’s recent measures. Yet, the market impact is expected to remain modest given that China’s imports of U.S. energy products remain relatively low.

ETF and Market Performance Overview

Natural gas ETFs surged over the week, posting a +8.48% WTD gain, supported by strong demand and larger-than-expected storage withdrawals. The WisdomTree Natural Gas ETF (NGAS) followed this trend, rising +9.13% WTD and +7.45% YTD.

Conversely, Crude Oil ETFs extended their losses, declining 0.77% WTD, though they remained slightly positive YTD at +0.40%. The WisdomTree WTI Crude Oil ETC (CRUD) dropped 2.00% WTD, with minimal YTD losses of -0.12%. Notably, crude oil ETFs experienced significant outflows, with YTD withdrawals reaching -€358 million, reflecting ongoing investor skepticism amid supply concerns.

Here’s a comparison between Energy ETFs

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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.