With the changing trends, bearish investors are now scrambling to cover their positions. Since August, money managers have held almost two bearish positions on gas for every bullish trade. With a market that heavily negative on natgas, prices are vulnerable to sharp swings as traders buy back contracts to close out short positions.

“The market is reacting a little bit to the prospect of lower temperatures in the next couple of weeks,” Santiago Diaz, energy trading associate at FCStone Latin America LLC, told Bloomberg. “Traders that were short are probably covering those positions, maybe realizing some of the gains to report at the end of the year or to get some spending money.”

According to Bloomberg, gas inventories likely dropped by 42 billion cubic feet last week, compared to the five-year average withdrawal rate of 95 billion for the period. Natural gas stockpiles were sitting at 3.814 trillion bcf on December 18, or 12.1% above the five-year average for this time of year.The U.S. Energy Information Administration will release its gas inventory report on December 31.

United States Natural Gas Fund

For more information on the natgas market, visit our natural gas category.

Max Chen contributed to this article.

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