Bearish outlook on US natural gas market surges to record

By CHRISTINE BUURMA
Bloomberg

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

Hedge funds boosted their net-short position in gas contracts by 6.8% to a record 166,165 in the week ended Nov. 3, even as prices jumped 7.7%, according to US 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 US 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 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 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/MMBtu on the New York Mercantile Exchange in the period covered by the CFTC report. Futures tumbled 8% in October, the biggest monthly decline this year. Prices slid 3.3% 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% of US households use gas for heating.

US natural gas production may climb 5.6% this year to a record 79.06 billion cubic feet/day, forecasts from the US 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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