Natural Gas Hedging for Manufacturers: Hedge the Variance, Not the Forecast

EIA expects natural gas inventories to reach 3,985 Bcf in October, the highest level heading into winter since 2016. It credits higher production and reduced LNG feedgas from facility maintenance. In its October 6 outlook, EIA puts Henry Hub at $3.48 per MMBtu for 2026 and $3.16 for 2027, a drop of about 9 percent.

Why a soft forecast is not a reason to skip a hedge

If you buy gas for boilers, ovens or kilns, the easy conclusion is to stay on index and wait. If the forecast is right, you will probably be fine. But a hedge was never a bet on the forecast.

The question for a plant is what price move the business cannot absorb. If a 30 percent spike in gas cost wipes out a quarter of margin, that is a budget-variance problem, and it exists regardless of what the average outcome looks like. A cheaper expected price does not remove the tail. It only changes how much you pay to protect against it.

Two things to keep in mind

The upside risk is demand, not supply. EIA's August outlook has U.S. LNG exports rising from 17 Bcf/d in 2026 to 19 Bcf/d in 2027. Full storage now says little about how tight the market looks a year from now.

Henry Hub is not your price. Your delivered cost includes basis and utility transportation and balancing charges, and those can move independently of the benchmark.

How to structure it

A common structure for a mid-market buyer is to layer: fix a portion of expected volume now, add more at set intervals, and leave a portion on index. The layers matter less than writing down, before the market moves, what outcome you are protecting and what you will do if prices fall after you have fixed.

Cheap gas is the best time to have that conversation, because nobody is under pressure.

Sources: EIA Short-Term Energy Outlook (October 6, 2026 release) · EIA press release, August 11, 2026