2014.09.0806:23:51UTC+00Hedge funds end bullish bets on gas

Declining volatility and prices have driven hedge funds to exit from natural gas markets in the US behind an influx of supply.

According to data from the US Commodity Futures Trading Commission, net long positions for four benchmarks were cut by 11% during the week that ended on September 2nd. Bullish bets have steadily fallen for the past six straight months while investors taking up short positions increased to the highest in nine months.

As a sign that producers are becoming less concerned about price volatility, holdings in gas have been reduced by 25% from a record amount set in April 2013. With stockpiles and output surging at a rapid pace, the range of price swings for the period are now at the narrowest since 2009.

Prices for natural gas dropped by 0.5%, or 2.1 cents, to a price per million British thermal units of $3.89 on the New York Mercantile Exchange. Futures today were mostly unchanged after declining by 0.7% last week as part of their 10% fall this year so far.

Energy Analyst Tim Evans from New York’s Citi Futures says that, “There’s just a level of comfort in the marketplace that supply is growing. Consumers may not see a compelling reason to have a larger hedge position than a year ago; producers are not thrilled or motivated.”

Inventories of gas have risen by 1.887 trillion cubic feet ever since reaching its lowest in 11 years in March to bring the total by the end of August to 2.709 trillion. Production of gas in the US is heading towards a fourth consecutive annual record with new shale deposits allowing more wells to be operational. The Energy Information Administration says that the average daily output from the Northeast’s Marcellus field for September will be 31% higher than the previous year at 15.9 billion cubic feet.