Hedge funds got more bullish on natural gas, betting the most on rising prices in 11 weeks as cold weather in the U.S. diminished fuel inventories.
Money managers boosted net-long positions by 44 percent in the seven days ended Dec. 10, U.S. Commodity Futures Trading Commission data show. The total was the most since Sept. 24. Bullish wagers increased for a third week.
Gas surged 6.6 percent during the report week as forecasts showed widespread below-normal temperatures. MDA Weather Services in Gaithersburg, Maryland, predicted it would be colder than average in most of the contiguous U.S. from Dec. 23 through Dec. 27. A government report on Dec. 5 showed a weekly drop in gas supply that surpassed analysts’ estimates.
“The weather has been incredibly cold,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “The expectation is that we’re going to see stockpiles continue to be depleted by this boost in heating demand, so investors are increasing bullish bets on the natural gas futures contract.”
Natural gas jumped 26.1 cents to $4.237 per million British thermal units on the New York Mercantile Exchange in the week covered by the report. The fuel rose to $4.409 on Dec. 12, the highest settlement since July 20, 2011. Gas slipped 8.6 cents, or 2 percent, to $4.265 per million Btu at 1:03 p.m. today. Prices are up 27 percent this year.
Gas rose to a six-month high on Dec. 5 after a government report showed the biggest November stockpile decline on record as frigid weather spurred heating demand. The Energy Information Administration said inventories tumbled 162 billion cubic feet in the week ended Nov. 29 to 3.614 trillion. Analyst estimates compiled by Bloomberg predicted a withdrawal of 146 billion. The five-year average drop for the period was 41 billion.
EIA data released Dec. 12 showed supplies fell by 81 billion cubic feet in the week ended Dec. 6 to 3.533 trillion, compared with the five-year average drop of 76 billion. Supplies were 3 percent below the five-year average and 7.2 percent less than last year’s supplies for the period, EIA data show.
Gas prices slid from that high on Dec. 6 as forecasts showed a shift to milder weather after an arctic blast. The futures then climbed on Dec. 9 and Dec. 10 as an icy storm fueled by the coldest air of the season blanketed the U.S. from coast to coast, bringing snow and sleet.