Wall Street Is Betting Big Against Natural Gas as a Mild Winter Looms
Speculators have piled into the biggest bearish natural gas bet in years, but a crowded short position and tightening storage leave the trade one cold snap away from an ugly reversal.
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As of October 20, 2026, speculators held 505,747 short contracts in NYMEX Henry Hub natural gas against 264,475 longs. That left a net short of 241,272, the largest since February 11, 2020, in Commodity Futures Trading Commission data released Friday, October 23.
Gas fell sharply on warm forecasts. United States Natural Gas Fund (NYSEARCA:UNG) dropped 3.13% to $9.58. EQT (NYSE:EQT | EQT Price Prediction) rose 1.76%, and Expand Energy (NASDAQ:EXE) gained 0.29%.
If you own any of these, that split matters. When a short trade gets this crowded, it can reverse quickly, and a futures fund is an expensive place to wait for that.
Hedge Funds Built Their Largest Short Since 2024
A net short means traders have sold more futures than they bought, so they profit when prices fall. The net short fell from 233,578 a week earlier, though it remains below the all-time high of 262,061 set June 9, 2015.
Hedge funds cut longs by 24,641 and added 6,287 shorts. Their net short rose to 157,409 from 126,481, the largest since February 20, 2024. Our analysis puts managed-money shorts across seven benchmark contracts at 569,954, the second-highest level since August 2013.
Short sellers must buy contracts back to close out, and if a cold snap forces many to buy back at once, their buying can push prices up sharply.
Warm Forecasts Drove a Steep Weekly Slide
November gas settled at $3.116 on October 16, then at $2.790 on October 21 and $2.796 on October 22. It was trading near $2.63 late Friday. That works out to a weekly drop of roughly 15% to 16%, about 22% over a month and about 34% over a year.
December, the next contract to become the front month, slipped from $3.386 to about $3.05. The government’s winter outlook expects a very strong El Niño to bring warmer weather across the northern U.S., the Midwest and much of the East. Ken Graham, who runs the National Weather Service, said: “a very strong El Niño will likely bring a southward and eastward shift to the jet stream.”
Short-range maps put the odds of above-normal warmth from October 29 to November 2 at 70% to 80% across the Southeast. Phil Flynn of Price Futures Group said prices are “going up and down with the weather right now.”
Storage and Exports Undercut the Bearish Case
The market ignored a bullish storage report. Inventories rose by 77 Bcf, below the 79 Bcf analysts expected, the 86 Bcf added a year earlier, and the five-year average of 87 Bcf. Storage now stands only 1.0% above the five-year average and 4.0% below last year.
Output has eased to about 111.4 Bcf/d from a record 113.3 Bcf/d. Meanwhile, gas flowing to export terminals rose to about 18.2 Bcf/d. Tanker attacks in the Strait of Hormuz keep European prices high, which keeps demand for U.S. shipments strong.
Robert DiDona of Energy Ventures Analysis still sees “not much of a reason here for us to be very bullish.” In the near term, the weather will likely matter more than these supply numbers.
Producers Rose While the Fund Fell
Goldman Sachs (NYSE:GS) raised its EQT target to $62 from $59 and its Expand target to $117 from $110. EQT gained 2.45% for the week, while Expand slipped 0.19%.
Producer stocks reflect years of demand from power plants and export terminals, while UNG tracks only the nearest contract. Daniel Brown becomes Expand’s CEO on October 26, both companies report on October 27, and the Fed decides on October 28.
Why UNG’s Roll Costs Could Outlast a Short Squeeze
UNG closed just above its 52-week low of $9.51 and returned -26.65% over the past year.
The fund has to keep selling expiring contracts and buying later ones, and when later months cost more, as December does against November now, every switch loses money. That makes UNG a trading tool, and even a short squeeze would only briefly make up for that loss.
EQT has looked stronger by comparison. It held up while gas fell, carries no cost from switching contracts, and its $34.80 billion market value rests on long-term contracts. If EQT stays above $55.63 after its October 27 report, the split between producers and the gas price is holding.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
