Hedge funds and portfolio managers have taken their most bearish stance on U.S. natural gas in over six years, according to energy analyst John Kemp. As of October 20, money managers held a net short position equivalent to -1,833 billion cubic feet, a dramatic shift from the bullish net long position of +2,026 billion cubic feet recorded at the same time last year.
The shift comes as traders anticipate an unseasonably mild winter due to strong El Niño conditions, which are expected to reduce heating demand across the country. Kemp cited Commodity Futures Trading Commission data on NYMEX and ICE Henry Hub contracts, noting that the current net short position sits in the 3rd percentile of all trading weeks since 2010.
Traders expect that depressed prices will be necessary to clear surplus supplies by driving higher gas consumption among electric power generators. The World Meteorological Organization has warned that sea surface temperatures in the tropical Pacific, El Niño's epicenter, may rise to 3.8℃ above average between November and January, peaking around December.