Best gas ETFs to buy in 2024
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You can easily invest in the success of the gas market using an ETF, or exchange-traded fund. ETFs are beginner-friendly funds that trade on the stock market and that you can buy and sell shares in whenever you like.
There are two types of natural gas ETF; the majority track the gas price itself, while a few own stocks in companies whose business is in natural gas. Our experts have combed through both sets of options to come up with the best natural gas ETFs available today.
What are the top gas ETFs to buy?
Copy link to sectionOur expert picks for the best ETFs for this year are available in the table below. Use their individual ticker symbols to find them through your broker, or scroll down to learn more about why each one was chosen.
| # | ETF symbol | ETF name | Where to Trade |
|---|---|---|---|
| 1 | UNG | United States Natural Gas Fund | Buy UNG 77% of retail CFD accounts lose money. |
| 2 | BOIL | ProShares Ultra Bloomberg Natural Gas ETF | Buy BOIL 77% of retail CFD accounts lose money. |
| 3 | SPOG | iShares Oil & Gas Exploration & Production UCITS ETF | Buy SPOG 77% of retail CFD accounts lose money. |
| 4 | XOP | SPDR S&P Oil & Gas Exploration & Production ETF | Buy XOP 77% of retail CFD accounts lose money. |
| 5 | FTXN | First Trust Nasdaq Oil & Gas ETF | Buy FTXN 77% of retail CFD accounts lose money. |
1. United States Natural Gas Fund (NYSEARCA: UNG)
Copy link to sectionThe UNG fund is an ETF that tracks the price of natural gas. If you think the price of natural gas is going to increase, then this is the easiest way to speculate on it without creating your own commodity trading account.
The value of UNG shares is based on the gas price, which is set according to the value of the next futures contract in natural gas to expire. Futures contracts are how the actual gas itself is bought and sold, so it represents a close approximation as to the value of the gas at any given time.
UNG performed well in 2021, as the price of natural gas soared in the second half of the year. However, the longer term performance is more mixed. This fund is a better bet if you simply want to gain exposure to a short term increase in the gas price, because over time there is a limit to how high the price can go and it’s more likely to fall back again.
77% of retail CFD accounts lose money.
2. ProShares Ultra Bloomberg Natural Gas (NYSEARCA: BOIL)
Copy link to sectionThe Bloomberg Natural Gas fund is another ETF that tracks the price of gas futures contracts, but it does so in a very different way than the UNG fund. It is entirely focused on generating short term returns, which makes it very different from regular ETFs.
This fund gives you the opportunity to take advantage of daily swings in price. It uses leverage to try to generate returns that are 2x the change in the price of a futures contract as generated by the Bloomberg index that it tracks.
The long term results of the BOIL fund are irrelevant because of this. It’s targeted at a specific type of investor; one who knows enough about the natural gas market to be able to predict days when there’s likely to be a significant change, but who doesn’t want to trade the commodity directly.
77% of retail CFD accounts lose money.
3. iShares Oil & Gas Exploration & Production UCITS ETF (LON: SPOG)
Copy link to sectionThe iShares exploration fund is a different type of ETF to the previous two. Instead of tracking the natural gas price, it owns stocks in a variety of companies who drill for oil and gas and then turn it into usable fuel.
That means it might not suit every investor, because it includes stocks in oil companies as well as gas. If you want to invest in natural gas for environmental reasons, or because you think it is a cleaner alternative to the oil industry, it might not be for you.
However, a fund like this is a lot less risky than one that simply tracks the price of gas. Some of its holdings are large gas exploration companies, such as ConocoPhillips, which makes up 10% of the entire fund on its own.
77% of retail CFD accounts lose money.
4. SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA: XOP)
Copy link to sectionLike the previous fund, this one tracks the performance of companies involved in fossil fuel exploration projects. However, it’s different in how much of the fund is invested in each company and on the index that it tracks.
All the companies in this fund are listed on the S&P Total Market Index, a broad list of businesses from across the oil and gas sector. The fund owns each of them equally, so rather than being heavily invested in a small collection of stocks, it gives investors more of an overall exposure to the entire industry.
Like many funds with exposure to the gas industry in particular, the SPDR ETF has performed very well over the last year. Before that, however, its long term performance since inception in 2006 was quite flat. You have to decide whether you think recent results are sustainable over the long term.
77% of retail CFD accounts lose money.
5. First Trust Nasdaq Oil & Gas ETF (NASDAQ: FXTN)
Copy link to sectionThe First Trust fund is another that tracks the performance of stocks in the oil and natural gas sector. It has a different weighting and owns some different companies to the two previous oil and gas ETFs.
Both of its largest holdings, SM Energy and Centennial Resource Development, are involved in producing natural gas as well as oil. Combined, they represent a fifth of the entire fund, so it’s heavily involved in both industries.
The fund is one of the youngest on this list, having only been set up in 2016. Like the others, it’s relatively flat over the longer term, which reflects the mixed confidence investors have had in more traditional energy stocks. However, since the March 2020 crash, it has performed very well, as commodity prices have risen dramatically and boosted profits for all of these companies.
77% of retail CFD accounts lose money.
Where to buy the best gas ETFs
Copy link to sectionYou can buy ETFs through an online broker. It’s virtually the same process as getting an individual stock; you need to create an account, look for the ETF’s unique ticker symbol, and decide how many shares you want to own. All of the brokers below are great options to get started with.
77% of retail CFD accounts lose money.
82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
What is a gas ETF?
Copy link to sectionIt can be a fund that tracks the price of natural gas, or one that owns shares in companies that operate in the natural gas sector. Those can be companies that get the gas out of the ground, ones that build the pipelines to transport it around, or the businesses at the end who sell it to consumers.
What makes an ETF different from traditional funds is that it’s always available to trade on the stock market. Whereas mutual (managed) funds can only be bought and sold at a fixed price one per day, ETFs are just like any other stock with a constantly fluctuating price, based on the value of the assets it holds.
ETFs are also, normally, passive investment funds. That means there isn’t a manager deciding on which assets to own. Instead, it simply tracks a benchmark index (such as the price of natural gas) or owns all the stocks from a particular index, which might be something like the S&P 500.
Are gas ETFs a good investment?
Copy link to sectionETFs generally are a good investment for beginners, or anyone who doesn’t have the time to micromanage their own portfolio. You can easily ‘set and forget’ an ETF, trusting the diversity of assets that it owns to protect you from too much risk. The most important decision is choosing a good industry, and whether gas is the one is up to you.
Over the last 20 years, natural gas has become more and more popular as a cleaner alternative to other fossil fuels, like coal and oil. It now makes up a quarter of the overall energy demand, it’s easy to store, and creates fewer emissions than traditional fuel sources when it’s burned.
However, the growth in demand stalled during the pandemic. It’s still costly and time consuming to transport gas around, and it’s under pressure from even more environmentally-friendly renewable energy sources. You have to decide whether it still represents a good investment despite that. If so, then sign up to a broker straight away to get started or read more about: best ETF platforms.
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