U.S. Gas Bears Seeing No End to Rout Send Bets to Record

Updated on
  • Money managers boost net-short position by 6.8 percent
  • Warm weather may linger in eastern U.S. through late November

It’s going to take more than a 16-cent rally to spook the bears in the U.S. natural gas market.

Hedge funds boosted their net-short position in gas contracts by 6.8 percent to a record 166,165 in the week ended Nov. 3, even as prices jumped 7.7 percent, according to U.S. Commodity Futures Trading Commission data. Long wagers rose for the first time in six weeks.

Speculators have raised bearish bets six out of the last seven weeks as gas supplies keep flowing out of U.S. shale formations. Stockpiles swelled to 3.929 trillion cubic feet last week, matching an all-time high. Warmer-than-usual weather will continue to sap demand for the heating fuel through the third week of November, forecasts from Commodity Weather Group LLC show.

“We have a huge amount of gas in storage and no weather demand,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Production is continuing to post annual records. Traders can’t ignore those realities.”

Gas futures climbed 16.1 cents to $2.253 per million British thermal units on the New York Mercantile Exchange in the period covered by the CFTC report. Futures tumbled 8 percent in October, the biggest monthly decline this year. Prices slid 3.3 percent to $2.294 at 10:14 a.m.

For the first time since 1994, New York’s Central Park reached at least 70 degrees Fahrenheit (21 Celsius) for four straight days in November, according to the National Weather Service. About 49 percent of U.S. households use gas for heating.

U.S. natural gas production may climb 5.6 percent this year to a record 79.06 billion cubic feet a day, forecasts from the U.S. Energy Information Administration show. Output has surged amid rising supplies from shale reservoirs, including the Marcellus in Pennsylvania.

“It’s hard to see any reason why gas would sustain a rally,” Yawger said.

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