Natural Gas Futures (NYMEX) - COT Report for the week ending 2026-05-22

Executive summary

This week's report reveals a significant shift in speculative sentiment, as Managed Money aggressively covered short positions, reducing their net short stance from a recent extreme. This occurred alongside a broad liquidation of positions across the market, evidenced by a material drop in open interest. Commercial participants also slightly reduced their net short hedging, primarily by cutting both long and short positions. Despite the substantial short-covering, front-month futures prices ended the reporting week lower, suggesting underlying market weakness that absorbed the buying pressure from speculators.

Positioning

• Managed Money (Speculators): The net position for this group is now -96,303 contracts (188,978 long vs 285,281 short). This is a significant reduction from last week's net short of -120,065 contracts, which was the largest net short position seen in recent months.
• Producer/Merchant (Commercials): Commercials hold a net short position of -20,268 contracts (238,405 long vs 258,673 short). This is a relatively modest net short stance for this category and is smaller than last week's net short of -26,324 contracts.
• Swap Dealers: This category remains the primary long counterparty in the market, holding a substantial net long position of +194,492 contracts (222,010 long vs 27,518 short).

Flows and week-over-week changes

The reporting week was characterized by short-covering and position liquidation.

• Managed Money: The net position improved by +23,762 contracts. This change was overwhelmingly driven by a reduction in short positions, which fell by 16,764 contracts. Longs also increased by a more modest 6,998 contracts. This flow is a classic signal of short-covering.
• Producer/Merchant: Commercials saw their net position change by +6,056 contracts. This was the result of a significant reduction in overall hedging activity, with short positions decreasing by 17,854 contracts and long positions also falling by 11,798 contracts.
• Open Interest: Total open interest declined by a notable 28,850 contracts, indicating that the week's activity was dominated by traders closing out existing positions rather than initiating new ones.

Commercials vs speculators

The classic positioning dynamic persists, with speculators holding a large directional bet against the market while commercials engage in hedging.

• Speculative Bearishness Wanes: While still heavily net short at -96,303 contracts, the speculative community has significantly reduced its bearish exposure from the peak levels seen in the prior report.
• Commercial Hedging: The Producer/Merchant net short of -20,268 contracts reflects ongoing producer hedging. The week-over-week reduction in both long and short positions suggests some producers may have lifted hedges as prices fluctuated.
• Swap Dealers as Intermediaries: Swap Dealers continue to absorb producer selling and speculative shorting, holding a large net long of +194,492 contracts. They increased this net long position by 8,925 contracts this week.

Open interest and participation

• Total Open Interest: Stands at 1,599,429 contracts, down from 1,628,279 in the prior week. This decline amid short-covering points to a liquidation-driven market environment.
• Market Share: Managed Money accounts for 11.8% of long positions and a larger 17.8% of short positions. Notably, their spreading activity (simultaneous long and short positions, often across different contract months) represents a massive 33.6% of total open interest (537,770 contracts).
• Concentration: The market shows moderate concentration. The largest 4 traders by net position control 10.1% of both the long and short side. The largest 8 traders control 14.1% of the long side and 15.5% of the short side.

Price context

The price series provides crucial context for the positioning changes. The reporting period covers trading from May 18th to May 22nd.

• The front-month contract started the week strong, rallying from the prior week's close of $2.961 to a peak of $3.116 on May 19th.
• However, the price reversed sharply in the latter half of the week, falling to close at $2.910 on May 22nd.
• The significant short-covering from Managed Money likely occurred as prices fell from the mid-week peak, with funds either taking profits on short positions established at higher levels or being forced to cover as prices initially rallied. The fact that the market absorbed this buying and still closed lower on the week is a sign of underlying bearish pressure.

Risks and watchpoints

• Reduced Squeeze Risk: The substantial reduction in the Managed Money net short position from last week's extreme eases the immediate risk of a violent short-squeeze. However, the position remains large enough that any unexpected bullish catalyst could still force further covering.
• Underlying Weakness: The market's inability to sustain a rally despite over 23,000 contracts of net buying from speculators is a key watchpoint. It suggests that other participants (e.g., commercials initiating new hedges, other speculators selling) were active sellers into strength.
• Capital Flight: The drop in open interest signals that traders are reducing exposure. A reversal of this trend, where open interest begins to rise again, would be necessary to signal new conviction and capital entering the market, which could fuel a more sustainable trend.
• Producer Hedging: Watch for any re-acceleration in short hedging from the Producer/Merchant category. If they begin to sell forward aggressively again, it would add to bearish headwinds.