Hedge funds have turned bearish on US natural gas for the first time since 2024, amid signs of ample domestic supply and expectations of reduced export demand.
For the week ending May 26, asset managers took a net short position of 11,316 contracts across seven benchmark Henry Hub contracts, according to CFTC data. The week before, investors held a net long position of 15,270 contracts.
Exclusively short positions increased by 19,639 lots to 437,598, the highest in more than two years.
Prices for benchmark Henry Hub natural gas have fallen approximately 10% year-to-date as mild weather reduced demand for heating and power plant fuel. High US production levels also fueled inventory growth above historical averages.
US natural gas has been an exception in global energy markets this year. While the war with Iran pushed up prices for other fuels and oil, the US found itself awash in gas. Amid high oil prices, Texas drillers ramped up crude production, but this also led to an increase in associated gas production. Supply proved so abundant that local prices in West Texas traded in negative territory.
However, in recent days, US gas prices have jumped in response to a report showing that inventories increased less than analysts expected last week. This forced some hedge funds to cover short positions, pushing prices higher. July gas futures rose by approximately 10% in a week.