{"id":73652,"date":"2026-10-26T19:08:17","date_gmt":"2026-10-26T23:08:17","guid":{"rendered":"https:\/\/www2.stockmarketwatch.com\/stock-market-news\/hedge-funds-amass-record-short-position-on-natural-gas-amid-super-el-nino-outlook\/73652\/"},"modified":"2026-10-26T19:08:17","modified_gmt":"2026-10-26T23:08:17","slug":"hedge-funds-amass-record-short-position-on-natural-gas-amid-super-el-nino-outlook","status":"publish","type":"post","link":"https:\/\/www2.stockmarketwatch.com\/stock-market-news\/hedge-funds-amass-record-short-position-on-natural-gas-amid-super-el-nino-outlook\/73652\/","title":{"rendered":"Hedge Funds Amass Record Short Position on Natural Gas Amid &#8220;Super El Ni\u00f1o&#8221; Outlook"},"content":{"rendered":"<h2>Key Takeaways<\/h2>\n<ul>\n<li><strong>Hedge funds have built a record net short position<\/strong> in U.S. natural gas futures, with short-only positions across benchmark Henry Hub contracts climbing to <strong>599,731 contracts<\/strong>, the highest since records began in 2013.<\/li>\n<li><strong>A &quot;Super El Ni\u00f1o&quot; weather pattern<\/strong> is the primary driver behind the bearish sentiment, with forecasters predicting a significantly milder 2026-2027 winter that could suppress heating demand across the northern United States.<\/li>\n<li><strong>Natural gas prices have plummeted<\/strong>, with front-month futures falling more than <strong>15% in a single week<\/strong> to reach a six-month low of <strong>$2.526\/MMBtu<\/strong> as of October 26, 2026.<\/li>\n<li><strong>Market volatility risk is elevated<\/strong> due to the crowded nature of these short positions; any unexpected cold snap could trigger a massive &quot;short squeeze,&quot; forcing traders to cover positions and rapidly driving prices higher.<\/li>\n<\/ul>\n<h2>Bearish Bets Reach Historic Extremes<\/h2>\n<p>Hedge funds and money managers are betting aggressively against natural gas as the 2026-2027 winter heating season approaches. According to the latest data from the <strong>Commodity Futures Trading Commission (CFTC)<\/strong>, net short positions have surged to <strong>192,728 contracts<\/strong>, the most bearish level in over six years. This extreme positioning reflects a market conviction that the looming winter will fail to generate the demand necessary to drain current inventories.<\/p>\n<p>The sell-off has been relentless, with the United States Natural Gas Fund (<a href=\"\/stock\/UNG\">UNG<\/a>) dropping over <strong>3%<\/strong> in recent sessions. Major producers are also feeling the shift in market dynamics; EQT Corp (<a href=\"\/stock\/EQT\">EQT<\/a>) and Expand Energy (<a href=\"\/stock\/EXE\">EXE<\/a>) are navigating a landscape where the &quot;widow-maker&quot; spread\u2014the price difference between March and April futures\u2014has collapsed to a record low of <strong>6 cents<\/strong>, signaling that traders see almost no risk of supply tightness by the end of winter.<\/p>\n<h2>&quot;Super El Ni\u00f1o&quot; Threatens Heating Demand<\/h2>\n<p>The fundamental catalyst for this bearish wave is the strengthening <strong>El Ni\u00f1o<\/strong> southern oscillation, which meteorologists have upgraded to &quot;Super&quot; status. The <strong>National Oceanic and Atmospheric Administration (NOAA)<\/strong> reports a <strong>90% chance<\/strong> that this pattern will persist through the winter, typically bringing warmer-than-average temperatures to the Pacific Northwest, Midwest, and Northeast\u2014the primary regions for U.S. residential gas heating.<\/p>\n<p>Current forecasts from <strong>Commodity Weather Group<\/strong> suggest that October and November 2026 could rank as the third-warmest comparable period since 1950. While U.S. production has dipped slightly to <strong>111.9 billion cubic feet per day (Bcfd)<\/strong> from summer highs, and LNG exports remain robust at <strong>18.3 Bcfd<\/strong>, these factors have been insufficient to offset the projected &quot;demand destruction&quot; caused by the mild weather outlook.<\/p>\n<h2>Volatility and the Risk of a Short Squeeze<\/h2>\n<p>Despite the prevailing bearishness, analysts warn that the market is currently &quot;one-sided,&quot; creating a precarious environment for traders. With short interest at record highs and trading volumes thinning ahead of contract expirations, the market is highly susceptible to a <strong>short squeeze<\/strong>. A similar event in early 2024 saw money managers forced to exit over <strong>53,000 short contracts<\/strong> in a single week following a sudden winter storm.<\/p>\n<p>Technical indicators show natural gas is currently in <strong>oversold territory<\/strong>, with the Relative Strength Index (RSI) hovering near 38. While the physical market remains supported by geopolitical tensions in the Middle East and high global LNG demand, the &quot;paper market&quot; continues to trade almost exclusively on weather forecasts. Investors are closely watching the upcoming <strong>Energy Information Administration (EIA)<\/strong> storage reports, as any smaller-than-expected injection could serve as the spark for a sharp price reversal.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways Hedge funds have built a record net short position in U.S. natural gas futures, with short-only positions across 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