US Natural Gas Inventory Builds: A Bearish Signal for Energy Traders?

The U.S. natural gas market in late September 2025 presents a paradox: record storage levels coexist with cautious optimism about winter price potential. According to the EIA weekly storage report, working gas in storage reached 3,508 billion cubic feet (Bcf) as of September 19, 2025, a 75 Bcf net increase from the prior week and 6% above the five-year average. While this surplus has weighed on near-term prices, analysts and traders are parsing the data for clues about whether the bearish signal will persist or give way to a seasonal rebound.

Inventory Builds and Short-Term Sentiment

The latest inventory report underscores a persistent oversupply dynamic. For the week ending September 19, the 75 Bcf injection exceeded the five-year average of 56 Bcf and last year's 36 Bcf, according to Oil & Gas 360. This trend aligns with broader seasonal patterns, as the EIA notes that the refill season (April–October) has seen injections 19% higher than the five-year average, per Natural Gas Intel. However, the bearish implications are tempered by the EIA's projection in its Short-Term Energy Outlook that prices will rise to $4.60/MMBtu in January 2026 due to faster-than-normal winter withdrawals driven by LNG exports and flattening production.

Market participants are divided. On one hand, the surplus has kept Henry Hub prices range-bound near $2.93–$2.99/MMBtu, with traders citing weak LNG export demand and mild weather as headwinds, according to the AGA market indicators. On the other, the EIA's Short-Term Energy Outlook highlights that rising LNG export capacity-bolstered by projects like Plaquemines LNG Phase 2-will tighten the domestic supply-demand balance by year-end. This duality creates a tug-of-war between short-term bearishness and long-term bullishness.

Speculative Positioning and COT Insights

The CFTC COT report for September 23, 2025, reveals a nuanced picture of speculative positioning. Total open interest in natural gas futures stood at 7,929,962 MMBtus, with non-commercial (speculative) traders holding 1,849,396 MMBtus in long positions and 1,139,422 MMBtus in short positions. This net long position of 709,974 MMBtus suggests a cautious bullish bias among speculators, despite the inventory surplus.

However, the data also highlights shifting dynamics. Swap dealers and managed money accounts, which together account for 23.3% of open interest, have reduced their net longs compared to mid-August, when the net speculative position was 900,000 MMBtus. This contraction reflects growing uncertainty about the durability of winter price gains, particularly as production remains robust (108.7 Bcf/d in August 2025) and power sector demand shifts toward coal and renewables.

Near-Term Price Pressure and Key Risks

The immediate price outlook remains bearish, with the EIA forecasting an average of $3.00/MMBtu for Q3 2025 and a gradual rise to $3.70/MMBtu in Q4. This trajectory hinges on two critical factors:
1. Inventory Withdrawal Rates: The EIA anticipates faster-than-normal winter withdrawals, but this depends on cold weather and strong LNG export demand. September's LNG exports averaged 15.6 Bcf/d, slightly below August's 15.8 Bcf/d, raising questions about the pace of export-driven demand.
2. Production Constraints: While production has flattened, the Permian and Haynesville regions continue to offset declines in the Appalachia basin. If drilling activity rebounds with higher oil prices, the oversupply risk could persist.

Geopolitical tensions in the Middle East and Asia also loom as wild cards. A disruption in LNG flows from key exporters like Qatar or a slowdown in Chinese demand could exacerbate price volatility. Conversely, a surge in European LNG imports due to ongoing Russian pipeline curtailments could provide a tailwind for U.S. prices.

Conclusion: Bearish for Now, But Winter Holds Potential

The current inventory surplus and speculative positioning suggest a bearish near-term outlook for natural gas traders. Prices are likely to remain range-bound until a catalyst-such as a cold snap, geopolitical shock, or LNG export surge-alters the supply-demand equation. However, the EIA's winter price projections and the expansion of U.S. LNG infrastructure imply that the bearish signal may be short-lived. Traders should monitor the COT report for shifts in speculative positioning and the EIA's weekly storage data for signs of a reversal in the inventory trend.

For now, the market is in a holding pattern, with the bearish sentiment tempered by the expectation that winter will bring tighter fundamentals. As one analyst put it, "The bear case is intact, but the bulls are waiting in the wings."