Why I Was Bullish Henry Hub Natural Gas

Executive Summary#

Executive summary

A correct catalyst, reached much faster than expected

On 6 November 2025, I presented a bullish view on Henry Hub natural gas at approximately $3.40 per million British thermal units. The thesis combined a structural rise in LNG feed-gas demand with cyclical winter heating demand, slower production growth and a lower gas-directed rig count. The target was $4.50–5.00 over six to nine months.

The target was reached within weeks rather than months. EIA spot data show Henry Hub averaging $4.29 in the week ending 28 November and $4.97 in the week ending 5 December. Prices then fell back before an extraordinary weather-driven spike in January 2026.

The thesis was successful as a tactical call. The process lesson was that a commodity target should be paired with an explicit take-profit rule: maintaining the position mechanically for the full six-to-nine-month horizon would have surrendered much of the gain.

Investment View#

Positioning#

Market Background#

US natural gas was transitioning from a largely domestic commodity into a market increasingly linked to global gas balances.

The original work recorded LNG exports near 14.3 billion cubic feet per day, around 10% higher year on year, storage near 3.8 trillion cubic feet and approximately 110 gas-directed rigs. These figures were intended to capture a market with substantial inventories but rising structural demand and less aggressive upstream investment.

The central question was whether LNG growth and winter consumption could tighten the domestic balance before producers responded.

Investment Thesis#

1. LNG Was Raising the Demand Floor#

New liquefaction capacity increased the amount of US gas capable of reaching global markets. That mattered because it linked Henry Hub more closely to European and Asian price signals and converted export infrastructure into a persistent source of domestic demand.

The EIA’s November 2025 outlook subsequently projected gross US LNG exports of 15 Bcf/d in 2025 and 16 Bcf/d in 2026. This broadly supported the structural direction of the original thesis.

2. Winter Weather Created Convexity#

Heating demand is highly nonlinear. A modestly cold forecast can tighten balances, while a severe cold event can produce large regional and daily price spikes because pipeline and storage constraints become binding.

The original call did not require an extreme event, but colder-than-normal conditions represented the clearest near-term catalyst.

3. Supply Growth Was Less Certain#

A lower rig count and producer capital discipline reduced confidence that production would immediately offset stronger demand. The thesis assumed that output growth would remain slow enough for inventories to normalise.

This was not the same as claiming that the United States lacked gas resources. Henry Hub supply is elastic over time; the bullish opportunity existed in the lag between higher demand and the drilling response.

4. Valuation Provided Asymmetry#

At approximately $3.40, the price was well below the original target and near the level at which some producers faced less attractive drilling economics. The downside was still meaningful if winter proved mild, but the combination of seasonality and LNG growth created favourable upside asymmetry.

Catalysts#

Principal Risks#

Outcome and Reflection#

The weekly EIA Henry Hub spot series rose from $3.54 in the week ending 7 November to $4.29 by 28 November and $4.97 by 5 December. The original $4.50–5.00 target was therefore reached approximately one month after publication.

Prices then declined to $3.45 in the final week of December. In January, an extreme weather event produced weekly averages above $12 and daily prints as high as $30.72, before the market rapidly returned toward $3 in February and March.

Research Methodology#

The original reference price, target and fundamental inputs come from the 6 November 2025 Queen’s Tower Capital presentation. The outcome uses EIA Henry Hub spot data, which provide an independently verifiable benchmark but are not identical to a specific futures contract’s realised P&L.

Sources#

Originally researched and prepared by Srinivas Medida while serving as Commodities Sector Head at Queen’s Tower Capital, Imperial College Investment Society. Revised and expanded for publication on SM Research. Material public-market figures were checked against the sources listed below; contemporaneous presentation figures are identified as such. The investment view reflects the assessment made on 6 November 2025; the outcome section was updated on 19 July 2026. This material is provided for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument.