The funds and other large speculators increased wagers that prices will rise by 24 percent in the seven days ended Nov. 9, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report, which was released yesterday. On Nov. 10, the Energy Department reported that stockpiles rose to 3.84 trillion cubic feet, surpassing last November’s total.
“If you have very high storage and the weather starts to go against you, that’s not a very good thing, especially if you’re long,” said Kyle Cooper, director of research at IAF Advisors in Houston.
As the North American winter nears, traders have focused attention on weather forecasts, speculating that lower-than- normal temperatures will spur heating demand and draw down supplies.
Natural gas for December delivery rose to $4.21 per million British thermal units, the highest level since Aug. 18, on the New York Mercantile Exchange on Nov. 9. Since then, gas has fallen 8.7 percent to settle yesterday at $3.845. Futures have declined 31 percent this year.
Last week’s bearish inventory report was compounded by revisions to the weather forecast, Cooper said.
Weather forecasters raised their temperature predictions on Nov. 11, according to MDA Federal Inc.’s EarthSat Energy Weather in Rockville, Maryland, which helped send prices down 2.9 percent that day and 3.2 percent the next.
Weather Models
The weather phenomenon known as La Niña is pushing up temperatures and it will be much warmer next week in the South, Midwest, and East than forecast last week, according to MDA Federal.
La Nina is characterized by unusually low temperatures in the equatorial Pacific Ocean, and may lead to higher-than-usual temperatures in the U.S. Southeast and lower-than-normal temperatures in the Northwest, according to the National Oceanic and Atmospheric Administration.
“The weather models have been incredibly volatile, which is many times a characteristic of a La Nina winter,” Cooper said. “Until we get more of winter under our belt, you’re going to see continued wide price swings as those models vary.”
Demand for gas, which peaks during the cold-weather months, drove futures above $6 per million Btu last January. About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.
Heating Demand
U.S. heating demand will average 18 percent below normal through Nov. 22, said David Salmon, a meteorologist with Weather Derivatives in Belton, Missouri, in a report yesterday.
“Heating needs will lean toward normal by late this week, but we’re now expected to swing considerably back toward below normal again on through the weekend and into the first of next week,” Salmon said. Last week’s forecasts “were way, way, way out of bounds in calling for the extensive cold as they did.”
Net-long positions held by what the CFTC categorizes as managed money, including hedge funds, commodity pools and commodity-trading advisers, in futures and options combined in four natural-gas contracts increased by 8,960.5 futures equivalents to 45,574.25 in the week ended Nov. 9, the highest since the seven days ended Sept. 28, the CFTC report showed.
The measure of natural-gas net longs includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps and ICE Henry Hub Swaps. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
Gasoline Bets
In other markets, bullish, or long, bets on gasoline prices rose 7 percent to 54,366 futures and options combined, the CFTC data showed. Net-long bets on heating oil rose for the first time in five weeks, advancing by 18,685, or 58 percent, to 51,137, the highest since October.
Net-long positions in oil rose by 14,787 futures and options combined, or 7.6 percent, to 208,915, the highest in at least four years, according to the CFTC report.
The Commitments of Traders Report was delayed by one business day because of the Nov. 11 Veteran’s Day holiday. It is usually released each Friday.
