Counter to the historical tendency for Nymex natural gas values to peak in the fourth quarter, the spot market in New York kicked off the first quarter yesterday by surging 6½% to a new winter high, 4.689. This event was likely spurred by two factors.
In the second half of December money managers were sitting on their largest bearish position (net short 135,411 futures contracts, i.e., enough gas to keep U.S Steel’s furnaces burning for the next 12 years) in two months. The last time managers were this bearish was back in late September.
Furthermore, non-commercial net shorts were at the third highest level, 202,096, ever. As such, speculators were overextended and the table was set for a short-covering rally.