US gas speculators boost net short positions to most in 2016

(Reuters) -- US natural gas speculators boosted their net short positions to the most so far this year on bets prices would continue to decline as inventories remain near record highs with heating demand expected to stay light for the rest of the winter.

Speculators in four major NYMEX and ICE markets increased their bearish bets by 15,382 contracts to 65,401 in the week to Feb. 23, the most since late December, the US Commodity Futures Trading Commission confirmed this week.

That was the fifth increase in net shorts in the last six weeks.

Shorts are bets that prices will fall and longs are wagers that prices will rise. The net position squares off the two.

Gas futures averaged $1.84 during the five trading days ended Feb. 23, compared with $1.98 during the four trading days in the prior week ended Feb. 16.

The prior week had only four trading days due to the US Presidents Day holiday on Feb. 15.

On Thursday, the front-month fell to its lowest level since March 1999 on warm weather forecasts and a smaller-than-expected storage draw.

Looking forward, however, gas futures are expected to move higher, fetching $2.07 for the balance of 2016 and $2.49 for 2017 on forecasts for rising industrial demand and increasing exports to Mexico via pipelines and the rest of the world via liquefied natural gas (LNG) terminals.

The long-awaited first LNG cargo from the lower 48 US states left Cheniere Energy's Sabine Pass terminal in Louisiana this week for Brazil.

Hedge funds have been bearish on gas since the end of 2014 as drillers, especially shale drillers, continue to pull near record amounts of the fuel out of the ground.

In November, net shorts held by speculators reached a five-year high of 166,165 contracts on forecasts for light heating demand this winter due to the warming effect of the El Nino weather pattern.

(Reporting by Scott DiSavino; Editing by Leslie Adler and Meredith Mazzilli)

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