Hedge funds have turned bearish on the U.S. natural gas market for the first time since 2024, as ample domestic supply and expectations of weaker export demand fuel investor concerns over energy price prospects. Data from the U.S. Commodity Futures Trading Commission (CFTC) shows that in the week ending May 26, money managers shifted from a net long position of 15,270 contracts to a net short position of 11,316 contracts across seven benchmark Henry Hub natural gas contracts. This marks the first time since 2024 that hedge funds have collectively bet on falling U.S. natural gas prices.

The data reveals that short-only positions increased by 19,639 contracts during the week, reaching 437,598 contracts—the highest level in over two years—reflecting a significant rise in market pessimism. Year-to-date, the benchmark Henry Hub natural gas price has fallen by approximately 10%. Market analysts attribute the pressure on natural gas prices partly to mild weather, which has dampened demand for heating and power generation. At the same time, robust U.S. natural gas production has pushed inventory levels above historical averages.

Compared to the broader upward trend in global energy markets, the U.S. natural gas market has notably underperformed this year. While international crude oil and other energy prices have generally risen amid geopolitical tensions, domestic natural gas supply in the U.S. remains abundant. Industry experts note that as oil prices increase, shale oil producers in Texas have ramped up crude extraction, leading to a simultaneous rise in natural gas output as a byproduct of oil drilling. This has further intensified supply pressures in the U.S. natural gas market.

In regions like West Texas, severe oversupply has even driven local natural gas prices into negative territory at times, indicating that storage and transportation capacities are nearing their limits. However, U.S. natural gas prices have recently staged a temporary rebound. The latest government inventory report showed that the increase in domestic natural gas stockpiles last week was smaller than market expectations, forcing some heavily short-positioned hedge funds to cover their bearish bets, which in turn spurred a rapid price rally.

As a result, U.S. natural gas futures for July delivery rose by about 10% during the week, marking one of the largest weekly gains in recent periods. Market observers suggest that although short-covering has driven a short-term price rebound, the U.S. natural gas market continues to face multiple challenges over the medium to long term, including oversupply, slowing export demand, and weather-related uncertainties. Price movements are likely to remain highly volatile.