Weather and Supply Tensions Fuel Volatility in Leveraged Natural Gas Fund

The ProShares Ultra Bloomberg Natural Gas exchange-traded fund (ETF) finds itself at a crossroads, caught between opposing short-term and long-term market forces. A significant revision to forecasts by the U.S. Energy Information Administration (EIA) has intensified pressure on the fund, which seeks to deliver twice the daily performance of natural gas futures. While the immediate impact of Winter Storm Fern has provided a price boost, the looming prospect of a substantial supply increase casts a shadow over the longer-term outlook. The central question for investors is whether this leveraged instrument can sustain its recent gains before a projected production surge from the Permian Basin materializes.

Key Market Developments:
* Forecast Revision: The EIA raised its price forecast for February and March by a substantial 40%.
* Output Decline: U.S. natural gas production fell by 3% in January due to storm-related disruptions.
* Long-Term View: For the full year 2026, the EIA lowered its average price expectation to $4.30 per million British thermal units (MMBtu).

The natural gas landscape is currently fractured. Recent weeks have seen massive withdrawals from storage inventories, and ongoing heating needs provide underlying price support. However, this is counterbalanced by meteorological forecasts predicting above-average temperatures across much of the United States until February 26, which is likely to suppress immediate demand.

The critical factor for the coming months will be the speed at which production responds to currently elevated prices. Analysts are now closely monitoring weekly storage reports to validate the actual supply tightness following the winter storm. The EIA already anticipates a significant supply surplus in the second half of 2026, suggesting the runway for sustained price rallies may be limited.

Should investors sell immediately? Or is it worth buying ProShares Ultra Bloomberg Natural Gas?

EIA Adjusts Outlook Following Winter Extremes

In response to recent weather volatility, the EIA issued a major correction to its projections on February 10. The agency dramatically increased its price expectations for the next two months, citing Winter Storm Fern and the resulting record withdrawals from gas storage. Although the storm caused a 3% dip in production for January, the EIA expects these affected capacities to return fully online throughout February.

Looking further ahead, the agency projects a cooling market. The second half of 2026 and 2027 are expected to see a marked increase in production, driven by heightened drilling activity and new pipeline capacity coming online in the Permian Basin. Consequently, the EIA reduced its average price forecast for 2026 to $4.30/MMBtu, a 5% decrease from its estimate in January.

Leverage Amplifies Inherent Commodity Swings

Trading under the ticker BOIL, the ProShares ETF is designed to deliver two times the daily return of its benchmark natural gas futures index. This structure significantly magnifies the commodity's inherent volatility. A recent market move illustrates the associated risks: when March futures prices retreated by 7% on February 9 due to milder weather forecasts, the ETF itself plummeted approximately 14% on the same day.

Market conditions appeared more favorable by February 12, with natural gas prices advancing 3.38% to $3.27/MMBtu. Investors should also consider the fund's cost structure. While its expense ratio of 0.95% is lower than that of some unleveraged competitors like the United States Natural Gas Fund (1.24%), the product involves complex management requirements due to daily rebalancing and the rolling of futures contracts.