In a dramatic reversal of market expectations, U.S. natural gas futures recently soared above $6 per million British thermal units (MMBtu) for the first time since 2022, after a powerful Arctic blast hit major parts of the country. This rally stands in stark contrast to the Energy Information Administration’s (EIA) January Short-Term Energy Outlook, which had initially predicted a mild winter and lowered price forecasts to an average of $3.38/MMBtu for the first quarter of 2026.
This unexpected price surge is poised to significantly boost the profitability of exploration and production companies operating in the natural gas industry. Consequently, diversified Energy exchange-traded funds (ETFs) that hold these companies are positioned to capture this windfall, offering investors a strategic avenue to gain exposure to the industry’s rally while managing company-specific risks.
Before suggesting such energy ETFs that will gain from this natural gas price rally and thus warrant a place in your watchlist, let us analyze what led to this surprise price hike and how energy ETFs might be the most strategic choice for your portfolio.
The recent price surge in U.S. natural gas is primarily a story of intense, weather-driven demand colliding with constrained supply. A powerful Arctic front triggered severe winter weather, drastically increasing the need for residential and commercial heating. This meteorological event is not just a cold snap; nearly half of all U.S. states declared emergencies due to the extreme conditions.
On the supply side, the storm has directly impacted energy infrastructure. Data indicate that U.S. natural gas production fell more than 11 billion cubic feet per day over a five-day period due to disruptions in operations. Furthermore, deliveries to key liquefied natural gas (LNG) export terminals fell significantly, further tightening the supply. While overall U.S. gas storage was robust before the storm — about 6% above the five-year average — the immediate, intense draw on supplies to meet heating demand created a short-term market squeeze.
U.S. Natural gas futures jumped more than 119% over the five days through Jan. 26, 2026 — the largest increase on record since 1990 (as per a Bloomberg press release).
This dynamic translates directly into stronger revenues and sturdier profits for major natural gas producers and operators. Leading producers like EQT Corporation EQT, Expand Energy EXE and Coterra Energy CTRA are positioned to benefit from the higher realized prices for their output.
The rally is also supportive of larger, diversified energy majors with substantial gas operations, such as ExxonMobil XOM and Chevron CVX. Leading liquified natural gas (LNG) transporters like Kinder Morgan KMI are also positioned to benefit from the higher realized prices.
While the gains from individual natural gas companies can be impressive, investing in a single stock has its unique set of operational risks. For instance, any major producer could face a sudden outage at a key facility or an unexpected regulatory hurdle, which could negatively impact a single stock’s price despite the broader commodity rally.
Against this backdrop, an Energy ETF offers a prudent alternative that mitigates single-stock risk, while diversifying investment across dozens of companies within the broader sector, insulating the portfolio from such idiosyncratic risks. It allows investors to capture the overarching trend of rising commodity prices and sector-wide profitability without betting on the fortunes of a single firm. This approach provides exposure not only to pure-play natural gas producers but also to integrated oil companies, midstream service providers, and equipment firms, creating a more balanced energy investment.
Taking into account the aforementioned developments, one may keep the following energy ETFs in their watchlist and invest if they seem fit, to reap the benefits of the recent price surge:
State Street Energy Select Sector SPDR ETF XLE
This fund, with assets under management (AUM) worth $31.16 billion, provides exposure to 22 companies in the oil, gas and consumable fuel, energy equipment and services industries. Its top three holdings include XOM (24.14%), CVX (17.58%) and ConocoPhillips COP (6.75%). KMI holds the seventh spot in this fund, with 3.72% weightage.
XLE has gone up 10.7% over the past year. The fund charges 8 basis points (bps) as fees. It traded at a volume of 39.83 million shares in the last trading session.
Vanguard Energy ETF VDE
This fund, with net assets worth $7 billion, provides exposure to 107 companies whose businesses are dominated by either of the following activities — the construction or provision of oil rigs, drilling equipment, and other energy-related service and equipment; or the exploration, production, marketing, refining, and/or transportation of oil and gas products. Its top three holdings include XOM (22.87%), CVX (15.02%) and COP (5.88%). KMI holds the sixth spot in this fund, with 2.83% weightage.
VDE has rallied 19.9% over the past year. The fund charges 9 bps as fees. It traded at a volume of 0.51 million shares in the last trading session.
Fidelity MSCI Energy Index ETF FENY
This fund, with net assets worth $1.28 billion, provides exposure to 101 energy companies from the U.S. equity market. Its top three holdings include XOM (22.98%), CVX (15.24%) and COP (6.08%). KMI holds the seventh spot in the fund, with 2.84% weightage.
FENY has gained 10.6% over the past year. The fund charges 8 bps as fees. It traded at a volume of 2.25 million shares in the last trading session.
Global X U.S. Natural Gas ETF LNGX
This fund, with net assets of $10.48 million, provides exposure to 34 companies, including those engaged in the exploration, production, and initial processing of natural gas and NGLs (‘upstream’), as well as transportation, storage, processing, offshore exports, and liquefaction infrastructure for LNG export. Its top three holdings include: CTRA (8.21%), EXE (7.25%) and EQT (7.23%). KMI holds the tenth position in this fund, with 4.26% weightage.
LNGX has gained 10.8% over the past year. The fund charges 45 bps as fees. It traded at a volume of 0.05 million shares in the last trading session.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
ConocoPhillips (COP) : Free Stock Analysis Report
EQT Corporation (EQT) : Free Stock Analysis Report
Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
State Street Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Vanguard Energy ETF (VDE): ETF Research Reports
Fidelity MSCI Energy Index ETF (FENY): ETF Research Reports
Coterra Energy Inc. (CTRA) : Free Stock Analysis Report
Expand Energy Corporation (EXE) : Free Stock Analysis Report
Global X U.S. Natural Gas ETF (LNGX): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
