Hot Weather Forecasts Trigger Short Covering, U.S. Natural Gas Futures Surge Over 5% in a Single Day
Claire Weston
The U.S. natural gas September contract surged as much as 5.2% Monday to $2.801 per million BTU — the biggest single-day move since May 28 — as a heat-wave forecast collided with historically extreme short positions forced to unwind.
How does a heat wave push gas prices higher?
Commodity Weather Group forecasts show well-above-normal temperatures across the U.S. Midwest and South over the coming weeks.
This means → air conditioners run full blast → electricity demand spikes → gas-fired power plants burn more fuel, pulling demand sharply higher.
Gulf Coast LNG export terminals also saw intake volumes jump to a one-month-plus high as seasonal maintenance winds down at several facilities.
In plain terms = more gas is leaving the country via exports, so less stays in the domestic market — supply tightens from both sides.
How extreme is the short positioning?
CFTC data show hedge funds held the largest net short position in benchmark Henry Hub contracts since 2020.
Outright short-only bets hit the highest level since Bloomberg began tracking the data in 2013.
This means → bearish wagers have piled up to a once-in-a-decade extreme. When prices reverse upward, those shorts must buy back contracts to close out — and their buying amplifies the rally.
How violent can a short squeeze get?
EBW Analytics senior analyst Eli Rubin noted that historically crowded short positions have repeatedly set the stage for sharp price spikes.
Spring 2024: amid heavy oversupply and aggressive speculative shorting, a single short-covering event of 288,000 contracts drove prices up nearly $1/mmBTU in one move.
January 2025: short covering was a key driver behind a 75% surge in three days during a historic cold snap.
In plain terms = the taller the short pile, the more violent the stampede when the exit doors narrow — today's 5% jump is the same playbook running again.
Can the rally last?
U.S. domestic gas inventories remain well above the seasonal average — the fundamental picture has not flipped.
New pipelines in West Texas are coming online through the year, and the market expects a wave of fresh supply to hit.
This reflects a rally driven more by position squeeze than by a genuine shift in supply-demand balance — $2.801 is still below recent-week highs, capping sustained upside.
Content is for reference only, not financial advice.