Speculators Boost US Natgas Net Longs

U.S. natural gas speculators boosted net long positions for the first week in three, betting prices will rise as production eases and demand picks up, absorbing some of the record amount of fuel left in inventories after a warm winter.

 

Speculators in four major NYMEX and ICE markets increased their bullish bets by 22,790 contracts to 38,520 in the week to May 10, the U.S. Commodity Futures Trading Commission said on Friday.

 

That is the highest levels for total net longs since speculators' positions turned net long at the start of April.

 

Before April, speculative positions were net short for 66 weeks in a row from December 2014 through the end of March 2016, the longest bearish streak on record, according to Reuters data going back to 2010.

 

Gas futures on the NYMEX averaged $2.11 per mmBtu during the five trading days ended May 10 versus $2.08 during the five trading days ended May 3.

 

To avoid filling storage caverns to their maximum capacity after a warm winter left stockpiles at record highs, analysts said prices will have to remain relatively low this year to pressure producers to cut output and encourage power generators to burn more gas instead of coal.

 

Spot gas prices at the Henry Hub benchmark have averaged $1.95 so far this year, while futures for the balance of 2016 were fetching $2.43. That compares with an average of $2.61 in 2015, the lowest since 1999.

 

Analysts said, however, that they expect gas prices in 2017 to rise enough to encourage drillers to boost output again to meet forecast growth in U.S. pipeline and liquefied natural gas exports and industrial demand.

 

Gas futures for calendar 2017 were trading around $2.91.


(Reporting by Scott DiSavino; Editing by Meredith Mazzilli and Chizu Nomiyama)