Hedge Funds Miss the Biggest Rally for Natural Gas of the Year

  • Speculators raised bearish bets before six-day price rally
  • Prices rose on power-plant switching, potential supply cuts

Money managers never saw the six-day rally in U.S. natural gas futures coming.

Hedge funds missed out on the biggest rebound so far this year, boosting their net-short position in contracts for the fuel to the highest in 10 weeks just before prices climbed. Their bearish bets advanced in the seven days ended March 8 while long wagers were little changed, according to U.S. Commodity Futures Trading Commission data.

Gas bulls are finally getting some good news as prices recover after tumbling to the lowest since the 1990s. Traders are looking past the biggest supply glut since 2012 to focus on sources of future demand, including liquefied natural gas exports and power plants switching to gas from coal.

“Hedge funds have had a very large short position, but it gets to a point where they start pressing their luck,” Thomas Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami, said by phone. “Cheap gas has been knocking out coal-fired power generation, and traders are hoping for confirmation that gas production is slowing.”

Gas futures fell 3 cents, or 1.7 percent, to $1.712 per million British thermal units on the New York Mercantile Exchange in the period covered by the commission’s report. They went on to rise 6.4 percent to settle at $1.822 on Friday, capping the first weekly gain since January. Gas for April delivery slipped 2.4 cents to $1.798 at 8:48 a.m. Monday on the exchange.

Before it's here, it's on the Bloomberg Terminal.