Some hedge funds dumped US natgas before big rally - data

Fri Aug 29, 2014 6:05pm EDT

By Barani Krishnan
    NEW YORK, Aug 29 (Reuters) - Some hedge funds seem to have
missed out on this week's big rally in U.S. natural gas, cutting
bullish bets on the fuel before prices hit six-week highs,
government data suggested on Friday. 
    Hedge funds and other money managers cut their net-long
position in natural gas by 1 percent in the week to Tuesday,
before a 4 percent price rally took the market to six-week highs
over the next three days, data from the U.S. Commodity Futures
Trading Commission (CFTC) showed. 
    The market spiked after weather forecasts persistently
signaled a late surge in summer heat that could bump up energy
usage for air conditioning. Until mid-August, temperatures had
been mild, making extra cooling of homes and offices hardly
necessary.      
    "It's logical to surmise from the CFTC data that at least a
few hedge funds missed this week's big move in natgas by selling
out before the wave higher," said Steve Mosley, president at SMC
Advisory Services in Little Rock, Arkansas.
    "The warmer-than-expected weather forecasts lately and a few
tropical storm warnings appear to have been taken more seriously
by some speculators who wanted to push the market up before
Labor Day," he said, referring to the Sept. 1 holiday.
    The front-month gas futures contract on the CME NYMEX 
settled the week to Friday up 6 percent at $4.065 per million
British thermal units.
    It was the best weekly gain in natural gas in six months and
the first time since mid-July that prices settled above $4 per
mmBtu.
    "We remain of the view that price risks are skewed to the
upside from these levels," Barclays said in a research note,
citing the weather.
    MDA Weather Services said its six-to-10-day forecast showed
persistent heat across the South and Texas. Its 11-to-15-day
reading indicated that significant cool air was not expected
across most of the United States.
    Thomson Reuters Analytics' U.S. weather models predicted
above-normal temperatures over the next two weeks, with 188
cooling degree days versus 185 on Thursday and a normal of 147
for this time of year.
    While the weather was interpreted as bullish for gas, weekly
supply builds in the fuel were not too large to depress prices,
even though U.S. utilities were rebuilding stockpiles at a
record pace since the end of winter.
    Last week's inventory build came in at the low end of market
expectations, with 75 bcf added to storage, against a Reuters
poll that forecast an average injection of 78 bcf. Prices hit a
six-week high of $4.10 after the data. 
    Technically, while October futures were trading below the
100-day and 200-day moving averages, the Relative Strength
Indicator was almost at 70, which indicated an "overbought
market". 
    The last time natural gas was overbought was in February,
when prices were at 3-1/2 year highs of nearly $6.50 from
heating demand during a brutal winter.

 (Reporting By Barani Krishnan; Editing by Tom Brown)