Winter Chill Spurs U.S. Gas Bears to Cut Bets to 7-Week Low

  • Managers cut net-short positions to lowest since Sept. 22
  • Outlook for colder weather seen sparking more demand

The threat of a chilly end to November is prompting U.S. natural-gas bears to retreat.

Money managers cut their net-short position in gas contracts by 17 percent to 137,167 futures equivalents in the week ended Nov. 10, the least since Sept. 22, according to the U.S. Commodity Futures Trading Commission. Long-only bets rose 1.1 percent to a seven-week high.

The measure includes an index of four contracts adjusted to futures

CFTC

Weather forecasts turned colder, showing that an unusually mild start to November will end on a frigid note, especially in the Midwest, the biggest consumer of the heating fuel. Though they’ve become more cautious, speculators are still heading into winter with an unprecedented bearish position as stockpiles swelled to an all-time high earlier this month. Gas prices are down 17 percent this year through Nov. 16, the worst year-to-date retreat since 2011.

Colder Weather

“The anticipation of colder weather and seasonably colder weather is going to spark a certain degree of demand and the funds are going to jump in the market a little bit,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The light is at the end of the tunnel. You can see the heating season close at hand.” 

Gas futures for December delivery rose 6.7 cents, or 3 percent, to $2.32 per million British thermal units on the New York Mercantile Exchange in the period covered by the CFTC report. Futures extended those gains to settle at $2.385 on Monday, the highest settlement since Oct. 22, and then slipped by 0.6 percent to $2.371 on Tuesday.

Above-normal temperatures in the Midwest through the East Coast over the next five days will give way to seasonal readings Nov. 21 through Nov. 25, said Commodity Weather Group LLC. Readings will drop even further the following five days in the Great Plains through the Great Lakes.

Short Lifespan

“The models over the weekend converged on a colder-than-normal pattern for the final third of November,” Matt Rogers, president of Commodity Weather in Bethesda, Maryland, said in an e-mail Monday. “The colder pattern probably only has a one-to-two week lifespan thanks to this very strong El Nino which should bring warmer prevailing weather back in play probably by second week of December.”

Gas inventories rose by 54 billion cubic feet to an all-time high of 3.985 trillion in the week ended Nov. 6, the U.S. Energy Information Administration said Monday in a revised report. Supplies were 4.7 percent above the five-year average.

The data was revised to show a bigger gain from the 49 billion initially reported on Friday because of statistical differences using a new format for the weekly report, said Jonathan Cogan, a spokesman for the agency in Washington. The EIA for the first time released estimates for five regions “to better match up the way the markets actually work,” he said. “We didn’t get any new data from companies.”

Last week was probably the last storage gain of the year, said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. That would signal the start of the heating season, when demand starts to outpace supply.

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