Hedge funds became less bullish on natural gas for the first time in six weeks as the coldest weather in almost 20 years gives way to higher temperatures.
Money managers cut net-long positions, or wagers on rising prices, by 3 percent in the seven days ended Dec. 31, U.S. Commodity Futures Trading Commission data show. Bullish bets, or long positions, fell from a six-month high.
Gas slumped 4.2 percent during the report week as forecasts showed mild weather that would curb fuel consumption. The futures have surged 23 percent since Nov. 1 amid rising heating demand, which today may reach the highest level since 1996, as frigid air swept across the central U.S. toward the East Coast, according to MDA Weather Services. MDA has predicted mostly above-normal temperatures in the lower-48 states from Jan. 11 to Jan. 15.
“Traders are hesitant to become more bullish since the weather is going to moderate,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The big question is where prices are going to be after the warm-up.”
Natural gas slid 18.6 cents to $4.23 per million British thermal units on the New York Mercantile Exchange in the week covered by the report. The fuel dropped 0.7 cent to settle at $4.299 per million Btu today in New York. Prices are up 32 percent from a year ago.
Chicago, Minneapolis and Pittsburgh may set low temperature records today, MDA said. The lowest high in Chicago is minus 11, last reached in 1994, while Pittsburgh’s record is minus 3 in 1994 and Minneapolis’s lowest high was minus 20 in 1888.
Gas advanced from a one-week low on Dec. 26 on speculation that a government report would show a bigger-than-average stockpile decline.
Natural Gas Supply
Prices dropped the next day, halting a seven-week rally, after data from the Energy Information Administration showed a decrease in inventories that matched forecasts. Stockpiles slipped 177 billion cubic feet to 3.071 trillion in the week ended Dec. 20. The five-year average withdrawal for the period was 125 billion.
EIA data released Jan. 3 showed supplies slid by less than forecast the next week. Inventories fell 97 billion cubic feet in the seven days ended Dec. 27, compared with a five-year average decline of 121 billion. Analyst estimates compiled by Bloomberg predicted a decrease of 112 billion.
“We still have a robust supply situation,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The market is strictly in weather mode right now.”
Gas climbed on Dec. 30 on speculation that an unusually cold start to the new year would stoke demand for the heating fuel. The futures then tumbled by the most in eight months on Dec. 31, trimming the biggest annual increase since 2005, as forecasts for moderating cold signaled reduced fuel consumption.
The low in Chicago on Jan. 11 may be 29 degrees Fahrenheit (minus 2 Celsius), 11 more than usual, after dropping to minus 12 yesterday, according to AccuWeather Inc. in State College, Pennsylvania. Minimum temperatures in New York may reach 43 degrees on Jan. 11, 16 above average.
About 49 percent of U.S. households use gas for heating, according to the EIA, the Energy Department’s statistical arm.
Net-long bets on four U.S. natural gas contracts held by money managers fell by 12,234 futures equivalents to 389,641 in the week ended Dec. 31, according to the CFTC. Bearish bets gained by 10,155 while long positions slid by 2,079.
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
In other markets, crude oil wagers rose by 6,421 futures and options combined, or 2.4 percent, to 270,386.
WTI crude slipped 80 cents, or 0.8 percent, to $98.42 a barrel on the Nymex in the week covered by the report and were at $93.69 today. Oil slid below $100 a barrel on Dec. 30 as inventories approached a record for the time of year.
Net-long positions in gasoline held by money managers, including hedge funds, commodity pools and commodity-trading advisers, jumped by 7,101 futures and options combined, or 15 percent, to 54,637, the CFTC report showed. Futures dropped 2.84 cents a gallon, or 1 percent, to $2.7858 in the week covered by the report and were at $2.663 today.
Gasoline at the pump, averaged nationwide, was unchanged at $3.317 a gallon yesterday, Heathrow, Florida-based AAA said.
Money managers’ bets on ultra low sulfur diesel advanced by 6,794, or 34 percent, to 26,602 futures and options combined, the CFTC report showed. Futures were little changed at $3.0772 a gallon in the week covered by the report and settled at $2.9388 yesterday.
“Last week’s natural gas inventory report was bearish and traders are hesitant to be too heavily long going into this week’s report,” Flynn said. “Investors are just marking time and waiting to see how things develop with the weather before they move the market much higher or lower.”
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