Hedge funds have accumulated their largest net short position in US natural gas futures in more than six years, amid expectations that a mild winter will weaken heating demand and exacerbate surplus supplies, according to  John Kemp, citing CFTC.

As of 20 October, speculative investors held a net short position equivalent to 1,833 billion cubic feet across NYMEX and ICE Henry Hub contracts, placing bearish positioning in the third percentile of weekly observations since 2010.

The positioning marks a sharp reversal from the same period last year, when money managers held a net long position equivalent to 2,026 billion cubic feet, ranking in the 74th percentile of historical observations.

The shift reflects expectations that strong El Niño conditions will suppress US heating demand over the winter, adding pressure to natural gas prices. Traders anticipate that lower prices may be needed to absorb excess supply by encouraging increased consumption among electricity generators.

The World Meteorological Organization has warned that tropical Pacific sea surface temperatures could rise as much as 3.8°C above average between November and January, potentially intensifying the impact of El Niño on winter weather patterns.