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U.S. Natural Gas Resumes Decline as Funds Become Less Bearish

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Jan. 23 (Bloomberg) -- Natural gas, the worst-performing commodity this year, resumed declines in New York amid forecasts for warmer-than-average weather even as hedge funds pared bets that U.S. prices will keep tumbling.

Futures for delivery to the Henry Hub in Louisiana sank as much as 4.8 percent today on the New York Mercantile Exchange, after snapping an eight-day slide on Jan. 20. Funds and other large speculators last week cut bets that gas would fall, paring their net-short position to the smallest since July, a Commodity Futures Trading Commission report on outstanding positions in futures and options showed after markets closed on Jan. 20.

“The funds are still holding large net short positions, but they are starting to buy them back,” Peter Beutel, president of Cameron Hanover Inc. in New Canaan, Connecticut, said in a note to clients. “Once prices do find a bottom, this change in open interest will combine with oversold pressures to give us a gargantuan rally. We just don’t know from where.”

Gas for February delivery slipped 3.5 percent to $2.26 a million British thermal units in Nymex electronic trading at 10:52 a.m. London time, erasing a 0.9 percent gain on Jan. 20.

New York temperatures will rise to 48 degrees Fahrenheit (8.9 Celsius) tomorrow from 34 degrees today, compared with a five-year seasonal norm of 28 degrees, according to CustomWeather Inc. data on Bloomberg. In Los Angeles, the maximum temperature will rise as high as 79 degrees Fahrenheit on Jan. 26, compared with a 69 degree normal high for the season.

Worst in GSCI

Gas is the biggest decliner this year on the Standard & Poor’s GSCI Spot Index of raw materials, losing more than 24 percent, in part because of increased supply from hydraulic fracturing, or fracking, a process of extracting natural gas and oil from shale rock by injecting water and chemicals.

Hedge funds and other large speculators held a net-short position of 86,604 lots as of Jan. 17, including Nymex Henry Hub futures and options, compared with 103,711 a week earlier, the CFTC’s Commitments of Traders report showed.

When aggregating long and short positions for four types of U.S. gas, bets turned to net-long positions of 15,938 from net shorts of 10,344 the previous week.

That measure of gas positions comprises Nymex Henry Hub natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps and ICE Henry Hub Swaps. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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