Hedge Funds Set Record Short on US Natural Gas as Mild Winter Forecasts Mount

Hedge-fund managers have amassed a record short position in US natural gas, betting on an unusually mild northern winter that would weaken demand for heating and power-plant fuel. Money managers raised short-only exposure across seven benchmark Henry Hub contracts to 599,731, the largest in CFTC data going back to May 2013. The net-short position on US gas climbed to 192,728, the most bearish in more than six years, while bullish bets fell to the lowest in almost two years. Benchmark US gas futures plunged more than 15% for the largest weekly decline since February as forecasts turned warmer for the first months of the northern winter. Commodity Weather Group predicts this month and next will be the third-warmest on records going back to 1950. The crowded bearish positioning raises the risk of a short squeeze, in which a sudden cold snap lifts demand and prices as traders rush to close shorts. A winter storm-driven squeeze worsened the historic gas rally in late January, when managers cut short-only positions by more than 53,000 lots in a single week.