Natural Gas December Futures Rise 4.6 Percent to $3.14 on Colder Eastern US Forecasts

Hedge funds entered last week holding the largest net short position in natural gas on record, built on assumptions of a warm fall and early winter driven by Super El Niño conditions. The Commodity Futures Trading Commission data released the prior week documented this accumulation. Revised temperature forecasts from BAMWX and the National Weather Service now project readings at or below seasonal averages from Thursday onward in key demand regions, forcing short covering that lifted front-month contracts to their highest intraday level since October 19.

Market participants face a classic squeeze dynamic where positioning has decoupled from near-term weather fundamentals. Tradition Energy noted that limited fundamental support still compels shorts to cover, increasing intraday volatility. This reflects standard incentive structures: traders overweighted seasonal models while underweighting forecast variance, leaving positions exposed to rapid revisions in heating demand projections.

Looking ahead, sustained temperatures below normal through the weekend would likely extend the price recovery and reduce net short exposure in the next CFTC report. Persistent warmer anomalies west of the Rockies could cap gains, preserving some of the original bearish thesis. Storage withdrawal rates and export flows to Europe and Asia remain the next variables that will determine whether the move represents a temporary adjustment or a structural repositioning.