Speculators Boost U.S. Natural Gas Long Positions

U.S. natural gas speculators boosted their net long positions on a bet that prices will rise in future months as an easing in production and pick-up in demand combine to absorb the record high amount of fuel left in inventories after a warm winter.

Speculators in four major NYMEX and ICE markets increased their bullish bets by 21,272 contracts to 36,788 in the week to April 19, the U.S. Commodity Futures Trading Commission said on Friday.

U.S. gas futures this week climbed to a 10-week high of $2.140 per million British thermal units, putting the front-month on track for a 12 percent gain, its biggest weekly percentage gain since early January.

Gas futures on the NYMEX averaged $1.99 per mmBtu during the five trading days ended April 19, versus $1.97 during the five-trading days ended April 12.

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

Spot gas prices at the Henry Hub benchmark <GT-HH-IDX> have averaged $1.95 so far this year, while futures for the balance of 2016 were fetching $2.45. That compares with an average of $2.61 in 2015, the lowest price since 1999.

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

Gas futures for calendar 2017 were trading around $2.94.

Reporting by Scott DiSavino