Gas Bears Stage Record Comeback as Demand Lull Boosts Supply

  • Money managers increase short gas positions by 23 percent
  • Government report showed record seasonal stockpile gain

Fall has arrived, New Yorkers are switching off their air conditioners, and that means the gas bears are back.

Money managers’ short-only gas contracts jumped 23 percent in the seven days ended Sept. 22, the biggest percentage gain on record, after falling to a six-month low a week earlier, U.S. Commodity Futures Trading Commission data show. Long wagers climbed 0.7 percent, and speculators’ net-short position in four gas contracts almost tripled to the most since late April.

Mild weather has curtailed gas demand, boosting stockpiles by a seasonal record for the seven days ended Sept. 18. A surplus to five-year average inventories rose to the highest in two years.

“Hedge funds are betting on weaker seasonal demand,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “Supplies are ample, and the market is leaning toward the bears as the heat begins to subside.”

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.
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.

Gas futures slumped 5.5 percent to $2.577 per million British thermal units on the New York Mercantile Exchange in the period covered by the CFTC report. Prices climbed 1.3 percent to $2.596 at 12:34 p.m. on Monday, rebounding from a five-month low.

Natural gas inventories were 4.5 percent above the five-year average as of Sept. 18, the biggest surplus since March 2013. Supplies have been above the norm since the seven days ended May 29. A government report Thursday showed gas stockpiles rose by 106 billion cubic feet to 3.44 trillion in the week ended Sept. 18, a record gain for the period.

Fair Weather

The weather will probably be mostly normal on the East Coast through Oct. 4, according to Commodity Weather Group LLC.  Power plants account for about 33 percent of gas demand, and 49 percent of U.S. households use the fuel for heating.

U.S. gas production is poised to reach a fifth straight annual record, bolstered by supplies from shale formations. Marketed output may rise 5.7 percent this year to average 78.95 billion cubic feet a day, according to the Energy Information Administration.

The net-short 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.

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