US natural gas prices are rising sharply, with the Henry Hub price now over $6/MMBtu. This is the highest level since late 2022. A winter storm affecting almost half of the US has increased heating demand. Despite the rise in demand, US gas storage remains steady. As of January 16, data from the EIA shows a 4.8% increase compared to last year and is 6.1% above the five-year average. Speculative short positions in the US gas market have added to the recent price changes. As of last Tuesday, speculators had a net short position of 77,014 lots in Henry Hub. Natural gas prices have surged past $6/MMBtu due to a severe winter storm. The extreme cold has raised heating demand and caused production issues, with reports of well freeze-offs cutting supply by about 10 Bcf/d temporarily. This mix of higher demand and lower supply is driving prices up sharply. This situation is a big change from just a few weeks ago when the market was in a comfortable position. Before the storm, gas storage levels were more than 6% above the five-year average, a surplus created during the milder winter of 2025. High inventory levels indicate that market fundamentals may not be as tight as current prices suggest. The price increase is further fueled by a significant short squeeze, as many traders were betting on falling prices. Recent data shows a large net short position, prompting these traders to buy back contracts to cover losses, which pushes prices even higher. The upcoming EIA storage report is crucial, with expectations for a record withdrawal of over 300 Bcf. This will maintain bullish pressure on the market in the short term. In the upcoming weeks, this price spike is likely temporary, driven by short-term weather and trading positions. Once the storm passes and production normalizes, stable storage levels should push prices down again. Traders could consider buying put options for March or April delivery to prepare for a price correction after the weather improves. We saw a similar trend in the winter of 2022 when a weather-related price spike was followed by a notable price drop once temperatures warmed up. This historical example suggests that selling during this strength or setting up bearish positions for spring could be a smart strategy. The key will be timing the entry as the storm’s impact lessens.

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