Bullish speculators made their biggest bets on U.S. natural gas in three weeks as futures surged to the highest levels since January.
Money managers boosted long positions by 3.4 percent in four natural gas contracts in the week ended May 31, according to U.S. Commodity Futures Trading Commission data. That was enough to wipe out the previous week’s net-short position, which was the first in eight weeks.
Gas futures advanced as hot weather and the unplanned shutdown of at least two East Coast reactors boosted power-plant demand. The added use has helped keep inventory gains below the five-year average for four straight weeks, government data show. The futures rose during the report week in part because of the expiration of weak June contracts on May 26, turning stronger July futures into the front-month contract.
“You had the contract roll and at the same time the weather reports started to become very aggressive for hot weather,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. “It doesn’t change the fundamentally high inventory level in place, and unless we get a blazing summer, we are going to have high inventories going into winter.”
Gas futures jumped 30.8 cents, or 16 percent, to $2.288 per million British thermal units during the report period on the New York Mercantile Exchange. Prices settled at 2.398 on Friday.
Short positions rose 0.4 percent in the most recent CFTC report to the highest level since March. This could result in price volatility in coming weeks with changes in weather forecasts, said Schenker.
“The bears aren’t willing to give up because they are looking at the high level of inventories,” he said. “The bulls are watching the weather.”