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Hedge Funds’ Net Long Positions in Natural Gas near 8-Month High


Feb. 5 2018, Updated 12:35 p.m. ET

Hedge funds 

Hedge funds’ net long positions in US natural gas futures and options contracts rose 50% to 164,450 on January 16–23, 2018. The net long positions also increased by 25,261 contracts or 18% from a year ago. Natural gas (UNG) prices increased ~10% on January 16–23, 2018.

Hedge funds’ net long positions are near an eight-month high, which suggests that hedge funds are bullish on US natural gas (GASL) (FCG) prices.

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Moving averages 

March US natural gas futures contracts were below their 100-day, 50-day, and 20-day moving averages on February 1, 2018, which suggests that prices could trend lower.

Lower gas prices have a negative impact on energy companies’ profitability like EXCO Resources (XCO), Newfield Exploration (NFX), Range Resources (RRC), and Rice Energy (RICE).

What could drive natural gas futures?  

A cold weather forecast and a larger-than-expected withdrawal in US natural gas inventories compared to historical averages could favor natural gas prices. However, mild weather forecasts and an increase in natural gas production could pressure prices.

EIA’s forecast  

US natural gas prices averaged $2.99 in 2017. Prices could average $2.88 per MMBtu in 2018 and $2.92 per MMBtu in 2019, according to the EIA. The expectation of a rise in US natural gas demand and exports will favor natural gas prices in 2019.

Read OPEC’s Compliance and US Oil Production Could Move Oil Prices for the latest updates on crude oil.


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