Hedge funds are the most bullish on benchmark U.S. natural-gas futures since at least 2006 after a freeze drove prices for the heating fuel to a three-year high.
Speculators increased their net-long position, or wagers on rising prices, in New York Mercantile Exchange futures by 21 percent in the week ended Jan. 21, according to U.S. Commodity Futures Trading Commission data that begins in 2006. A wider measure that includes three contracts tied to Henry Hub, the delivery point for Nymex futures, reached a one-month high.
Gas jumped above $5 per million British thermal units last week for the first time since June 2010 as forecasts showed arctic weather persisting through early February. This month may be the coldest January since 1994 in the lower 48 states, according to Commodity Weather Group LLC. The amount of gas withdrawn from storage from Oct. 31 through Jan. 17 was the most for that period on record, government data show.
“Traders are reacting to the forecasts for extreme cold temperatures persisting for the rest of the month,” said Biliana Pehlivanova, head of global natural gas and LNG research at Barclays Plc in New York. “If this weather continues, we could see prices pushing even higher.”
Natural gas rose 6.2 cents, or 1.4 percent, to $4.431 per million British thermal units on the Nymex in the week covered by the report. The fuel tumbled 33.5 cents, or 6.5 percent, to settle at $4.847 per million Btu today in New York after surging to $5.442 in early trading, the highest intraday price since Feb. 16, 2010. Gas advanced 20 percent last week, the biggest gain since the seven days ended Oct. 29, 2010. The futures are up 35 percent since Oct. 31.
Gas slipped 1 percent on Jan. 15 on forecasts for milder weather that would limit demand. Prices advanced 1.3 percent to a three-week high the next day after a report from the Energy Information Administration, the Energy Department’s statistical arm, showed inventories tumbled by 287 billion cubic feet in the week ended Jan. 10 to 2.53 trillion, a record decline.
Stockpiles may slide to 1.385 trillion cubic feet by March 31, Michael Hsueh, a strategist at Deutsche Bank AG in London, said in a Jan. 23 note to clients. Supplies totaled 1.687 trillion on March 29 last year.
Gas dropped 1.3 percent on Jan. 17, trimming its first weekly gain in a month, as forecasters including Commodity Weather Group in Bethesda, Maryland, said above-average temperatures would linger in the Northeast for a few days.
The futures jumped to the highest price in almost four weeks on Jan. 21 as a winter storm bringing heavy snow and frigid weather to the East Coast stoked consumption. Commodity Weather Group predicted colder-than-average weather in the eastern half of the U.S. through Feb. 2.
The low in Chicago on Jan. 27 may be minus 12 degrees Fahrenheit (minus 24 Celsius), 30 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. Temperatures in New York may fall to 11 degrees, 16 below normal.
About 49 percent of U.S. households use gas for heating, EIA data show.
“We’re seeing the cold persisting through the entire season, not just for a few weeks,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “We’re already encountering significant physical supply challenges in the market as the amount of gas in storage declines.”
Net-long bets on the Nymex U.S. natural gas contract held by money managers climbed by 26,571 futures equivalents to 154,643 in the week ended Jan. 21, according to the CFTC. Net longs bets on the four gas contracts held by money managers rose by 16,442 futures equivalents to 401,021.
The wider measure includes an index of the 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, hedge funds and large speculators increased bullish crude oil wagers by 781 futures and options combined, or 0.3 percent, to 230,503.
WTI crude advanced $2.40, or 2.6 percent, to $94.99 a barrel on the Nymex in the week covered by the report and settled at $96.64 on Jan. 24. Oil rose 1.7 percent on Jan. 15 after a government report showed that U.S. inventories tumbled to the lowest level in almost 22 months as imports plunged.
Hedge funds and other money managers raised bullish bets on Brent crude by 5 percent from a 14-month low a week ago, according to data from ICE Futures Europe.
Speculative bets that prices will increase, in futures and options combined, outnumbered short positions by 90,315 lots in the week ended Jan. 21, the London-based ICE exchange said in its weekly Commitments of Traders report. This is an increase of 4,657 contracts from 85,658, which was the lowest since Nov. 13, 2012.
Net-long positions in gasoline held by money managers, including hedge funds, commodity pools and commodity-trading advisers, slid by 6,261 futures and options combined, or 17 percent, to 31,280, the CFTC report showed. Futures were little changed to settle at $2.6206 in the week covered by the report. Gasoline closed at $2.6632 on Jan. 24.
Gasoline at U.S. pumps, averaged nationwide, rose 0.1 cent to $3.288 a gallon on Jan. 23, a third consecutive increase according to Heathrow, Florida-based AAA, the nation’s largest motoring company.
Money managers’ bets on ultra low sulfur diesel advanced by 3,322 to 6,625 futures and options combined, the CFTC report showed. Futures climbed 2.7 percent to $3.0147 a gallon in the week covered by the report and settled at $3.1374 a gallon on Jan. 24.
“The coldest week of the winter is probably still ahead of us,” BNP’s Viswanath said. “The balance of the 2014 natural gas price strip still looks too cheap.”