After a blistering and sustained rally sparked by the breakout of war between Russia and Ukraine in 2022, prices have fallen precipitously due to record-high U.S. production, warm-than-anticipated winters, and advances in drilling technology (which helped lead to a supply/demand imbalance).
Over the past five years, natural gas and natural gas proxies like the US Natural Gas Fund ETF (NYSE:) have fallen nearly 60%, and the commodity has lived up to its reputation as being the “widow maker.”
Image Source: TradingView
However, after a sharp, cold-driven surge, warmer outlooks for February have lowered short-term demand expectations, leading to a 15% plunge in natural gas prices Sunday evening.
Nevertheless, several bullish tailwinds are lining up that could set the stage for a dramatic, 2022-esque rally in natural gas. Below are three compelling reasons to be bullish on natural gas, including:
1. Data Center Energy Demand
Already,the artificial intelligence data center buildout is the largest infrastructure buildout in history. According to data from Grand View Research, the data center construction market reached more than $250 billion in 2025 as “hyperscalers” like Alphabet (NASDAQ:) and Microsoft (NASDAQ:) jockey for AI dominance. Meanwhile, the AI data center construction market is expected to balloon to $450 billion by the end of the decade.
Image Source: GrandView Research
Recent comments from Jensen Huang, Nvidia’s (NASDAQ:) iconic CEO, echo this sentiment. Huang recently delivered some noteworthy comments at the World Economic Forum (WEF) 2026 in Davos, Switzerland. First, Huang outright dismissed bubble fears, citing rising spot prices (even for older GPUs) and the extreme difficulty of renting them. Additionally, Huang predicts trillions of dollars are in the pipeline, ready to support the latest and most powerful AI models.
However, hyperscalers face a major obstacle – energy. Electricity prices are rising as AI data center electricity demand is expected to double by the end of the decade.
Image Source: IEA
While there is a lot of buzz on Wall Street about renewable and nuclear energy, these sources have higher start-up costs. For now, natural gas provides the best source of reliable, high-volume, and inexpensive electricity.
2. US LNG Producers Take Advantage of International Markets
Several large Liquefied Natural Gas (LNG) export terminals will debut in 2026, which will help U.S. LNG producers sell to Europe and the rest of the world. Because domestic gas is lower in the U.S. than in Europe, U.S. producers are likely to sell more product to Europe. In turn, domestic supply will be sucked up, creating a firm floor for natural gas prices.
Additionally, the Trump Administration has focused on an “American Energy Dominance” policy and secured several long-term LNG commitments from countries such as Japan and Qatar, ensuring ‘sticky’ LNG demand.
3. Natural Gas Will Fill the Coal Void
According to the U.S. Energy Information Administration (EIA), U.S. coal production fell 11.3% year-over-year as the number of coal-producing mines decreased from 560 to 524. While many countries are moving to renewable energy sources like solar, these sources are not enough to fill the void left by coal. For now, natural gas is the answer due to its practicality, affordability, and the fact that it emits roughly half the amount of CO2 as coal.
Natural Gas Technical View
Over the past few weeks, UNG has run from $10 to $16.90. However, after warmer-than-expected weather forecasts, UNG is likely to test the 200-day moving average. Bulls will want to see the 200-day moving average zone hold this week.
Image Source: TradingView
Bottom Line
While natural gas remains notorious for its short-term volatility and sensitivity to weather, the fundamentals are shifting toward a long-term bullish outlook. Between the insatiable energy requirements of AI data centers and growing U.S. exports, demand should rise in the long-term.
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This article originally published on Zacks Investment Research (zacks.com).
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