Hedge funds and other large speculators cut wagers on gas gaining by 16 percent in the seven days ended Sept. 14, according to Monday's edition of the weekly Commitments of Traders report from the Commodity Futures Trading Commission.
Gas has tumbled 31 percent this year amid rising production from shale formations and a supply glut was barely dented by the demand for air-conditioning in the hottest summer in at least 60 years.
"It's hard to stay long and stay buying when the trend continued to sell off," said Rich Ilczyszyn, a market strategist at Lind-Waldock, a broker in Chicago. "The weather play is over, and there is no major damage in the Gulf, no major storms."
Gas prices peaked June 16 at $5.196 per million British thermal units as forecasts pointed to hotter-than-normal weather and an active hurricane season. Prices have since declined 26 percent, falling in five of the past six weeks, as storms stayed away from major Gulf gas production and temperatures fell.
Natural gas for October delivery dropped by 20.2 cents, or 5 percent, to settle at $3.822 per million Btu on Monday on the New York Mercantile Exchange. The futures dropped to $3.61 on Aug. 27, the lowest price in 11 months.
Net-long positions in futures and options combined in four natural-gas contracts decreased by 8,730 futures equivalents to 45,961 in the week ended Sept. 14, the CFTC data 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, La., is the delivery point for the Nymex futures. It serves as a benchmark price for the fuel.
Temperatures in the U.S. declined starting from the second week of September, according to AccuWeather Inc. of State College, Pa.
Brad Florer, a trader at Kottke Associates Inc., an energy trading firm in Louisville, Ky., said, "At this time of the year, you are not going to see much cooling demand."
Travis Hartman, a meteorologist at MDA Federal Inc.'s EarthSat Energy Weather of Rockville, Md., said there were 1,018 population-weighted cooling degree days in the three months ended August, the most since 1950, when reliable record-keeping began.
Cooling degree days, calculated by subtracting a base of 65 degrees from the average daily temperature, is a value designed to show energy demand.
Energy Department data show that about 23 percent of U.S. electricity is generated with natural gas.
This hurricane season has had less of an impact on gas production in the Gulf than the government expected.
A total of 7.9 billion cubic feet of gas production was shut in from June through August because of storms, down from projections of 57.4 billion, the Energy Department said in its monthly Short-Term Energy Outlook issued Sept. 8.
Storms so far have spared main Gulf gas production areas.
About 10 percent of U.S. gas output will come from federal waters in the Gulf of Mexico this year compared with 17 percent five years ago, the Energy Department estimated.
U.S. gas stockpiles jumped 103 billion cubic feet in the week ended Sept. 10 to 3.267 trillion, the department reported last week.
A survey of Bloomberg users showed an expected increase of 95 billion. The inventory gain exceeded the five-year average for the first time since April.
The storage increase was the biggest weekly gain for this time of the year since 2006.
A surplus to the five-year average increased for the first time since the week ended April 30, rising to 6.2 percent from 5.5 percent the previous week. A deficit to year-earlier supplies narrowed to 5.3 percent from 6.5 percent.
Inventories will peak at 3.687 trillion cubic feet before cold-weather demand prompts utilities to pull gas from storage, the department predicted in the Short-Term Energy Outlook. Stockpiles increased to a record 3.837 trillion cubic feet last November.
