Cooler Forecasts Buoy Natural Gas Prices, Threaten a Big Short Bets that prices
will keep falling are running into dropping temperatures in the Eastern U.S. ...
By
Ryan Dezember
Updated Dec. 12, 2019 3:04 pm ET
Forecasts for cooler weather to close out the month buoyed natural gas prices on Thursday, halting a slide that has trimmed roughly 20% off the heating fuel since early November.
Natural gas futures for January delivery rose 3.8% to $2.328 per million British thermal units. That is down about 44% from the same time last year and still the lowest mid December level in four years, but the renewed call for chilly temperatures allayed fears among traders and analysts of an impending drop below $2.
“From a selloff perspective, the big move has happened,” said Ron Ozer, chief investment officer at Statar Capital, a gas-focused hedge fund. “The market is very short so getting a material move lower would need warm weather.”
Hedge funds and other money managers have built up one of the biggest “short” bets, or bets that natural gas prices will fall, of the past decade, according to U.S. Commodity Futures Trading Commission data. The bearish wager rivals in size a big short that was put on in August and subsequently blown out by an uncharacteristically steamy September that amped up demand for gas to power air conditioners.
A significantly colder turn to temperatures could risk the current wager on declining prices. Meteorologists that cater to traders on Thursday nudged their two-week temperature forecasts lower for the eastern half of the country.
“The general idea is to go a bit colder in the 6-10 day (forecast) and slow down the warming trends in the 11-15 day (forecast),” Commodity Weather Group wrote in a note to clients.
Cooler weather supported natural gas prices Thursday. Earlier this year, a truck is fueled with compressed natural gas. PHOTO: MARK MORAN/ASSOCIATED PRESS
Forecasts like that were enough for traders to shrug off a mildly bearish report from the U.S. Energy Information Administration that detailed a 73-billion-cubic-foot draw from gas stockpiles last week. That was a little less than some analysts had expected. Yet the withdrawal brought stockpiles in line with their five-year average.
Analysts with RBC Capital Markets on Wednesday lowered their predictions for average gas prices for the current quarter, to $2.60 per MMBtu, and next year more than 20 cents to $2.63, yet warned clients from getting too bearish.
“We continue to believe that there is upside,” they wrote. “In our view, after years of records on all sides of the balance, supply growth is beginning to slow and exports are picking up.”
Elsewhere in energy markets oil prices rose on renewed hopes for a trade deal between the U.S. and China and an International Energy Agency report that projected slower supply growth next year. West Texas Intermediate, the U.S. benchmark, closed up 0.7% at $59.18 a barrel. Brent crude, the global price, gained 0.75% to settle at $64.20....
(Source: Wall Street Journal)
M |
