Speculators Cut U.S. natgas net longs Again

U.S. natural gas speculators cut their net long positions for a second week in three, betting prices will decline in the future to encourage power generators to keep burning record amounts of gas instead of coal.

Speculators in four major NYMEX and ICE markets reduced their bearish bets by 11,801 contracts to a one-month low of 91,547 in the week to July 19, the U.S. Commodity Futures Trading Commission said on Friday. The weekly decline was the biggest since mid-May.

Gas futures on the NYMEX averaged $2.73 per million British thermal units during the five trading days ended July 19 versus $2.76 during the five trading days ended July 12. To avoid filling storage caverns to their maximum capacity after a warm winter left stockpiles at record highs, analysts forecast prices would 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 <GT-HH-IDX> have averaged $2.13 so far this year, while futures for the balance of 2016 were fetching $2.89. That compares with an average of $2.61 in 2015, the lowest since 1999. Analysts said, however, 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 $3.12.

Reporting by Scott DiSavino