Natural gas surges 8% as record short position unwinds on cooler forecasts

Natural gas prices surged 8% on Monday, marking the largest rally since September. The primary driver of this increase was a shift to cooler weather forecasts, which forced hedge funds to unwind their record short positions. As of 2:26 PM EST on November 9, 2026, Natural Gas Futures were trading at $3.21 per MMBtu, up 7.07% from the previous trading day.

The situation was highly imbalanced, with hedge funds' short-only position reaching a new record high last week as they bet on a Super El Niño bringing the warmest US winter on record. This setup was described by Tradition Energy’s Gary Cunningham as the "biggest short on record" in over a decade. Even with limited weather-driven support, the shorts were forced to buy back contracts, resulting in significant trading activity today.

Commodity Weather Group now forecasts normal seasonal weather across the eastern third of the US through November 18, with above-normal temperatures expected afterward. According to Criterion Research, the cooler outlook could add 20 to 30 billion cubic feet (Bcf) of demand over two weeks, a relatively minor increase considering current inventories.

Supply-side factors also limit the upside, as producers are scaling back output curtailments. Storage levels are comfortably above the five-year average and well below last year's levels, indicating ample capacity to absorb any additional demand. While El Niño forecasts suggest a milder winter across the North and Midwest, price forecasts remain below the 52-week high and down over a year.

The rally comes amid broader weakness in the energy markets, with Brent Oil down 5.36% and Crude Oil WTI falling 4.01%. While natural gas utilities showed modest gains, they are less sensitive to daily gas prices compared to producers. This event highlights the risk accumulation that can occur when markets collectively agree on a directional bias.

The evolving situation suggests that if mild weather persists after November 18, shorts may rebuild, but a persistent polar vortex could push the rally even higher than weather alone justifies. Investors should monitor weekly storage reports, curtailment counts, and longer-range temperature outlooks for further insights.