Photographer: Patrick T. Fallon/Bloomberg

Summer Lets Down Hedge Funds That Bet Big on a U.S. Gas Rally

Updated on
  • Money managers’ net-long position was biggest since Oct. 2014
  • U.S. natural gas futures capped biggest loss in four weeks

Hedge funds are still feeling the burn of last month’s heat wave.

They raised their net-long position in U.S. natural gas to the biggest in almost two years, counting on the blistering heat of late July to boost demand for the power-plant fuel and spark a price rally. Instead, gas futures plunged, capping the biggest loss in four weeks.

Not even the hottest summer weather in four years could lift the U.S. gas market out of a slump that had prices plunging in March to the lowest in almost two decades. A government report out Thursday showed U.S. gas stockpiles fell last week -- a rare occurrence for this time of year -- and futures still settled lower on the day. The fuel keeps flowing out of U.S. shale formations and supplies are on a track to reach a record before the winter.

That means “further losses are likely soon,” Andrew Weissman, chief executive officer of the Washington-based energy analysis company EBW AnalyticsGroup, said in a note to clients Friday.

Speculators raised their long wagers on U.S. gas in the week ended Aug. 2 while cutting their short bets, U.S. Commodity Futures Trading Commission data show. Their net-long position was the biggest since October 2014.

Gas futures meanwhile capped a 3.6 percent decline this week, settling at $2.772 per million British thermal units on Friday.