Hedge funds reduced bullish bets on gasoline by the most since June as stockpiles surged to an 11-month high before a cold blast that probably will curb demand in the U.S. Midwest and Northeast.
Money managers cut net-long positions, or wagers on rising prices by 22 percent in the week ended Jan. 14 to the lowest level since Nov. 19, U.S. Commodity Futures Trading Commission data show. Short positions more than doubled.
Gasoline tumbled to a two-month low last week after a government report showed supplies climbed to 233.1 million barrels, the highest since Feb. 8. Demand fell to the least in a year, pushing pump prices to a three-week low. Temperatures from the Midwest to New England are forecast to average below normal from Jan. 22 to Jan. 26, diminishing fuel use as drivers avoid icy and wet road conditions.
“Everything out there right now is bearish for gasoline,” Tom Finlon, director of Energy Analytics Group, said by phone from Jupiter, Fla., on Jan. 17. “Inventories built significantly across the nation last week and it’s January, the time when we traditionally see very low demand. We have more winter weather coming that may slow consumption further.”
Futures slipped 5.62 cents, or 2.1 percent, to $2.6224 a gallon on the New York Mercantile Exchange in the report week. The fuel rose 0.46 cent to $2.625 at 2:10 p.m. in electronic trading after settling at $2.6204 on Jan. 17. Gasoline is the third worst performer this year in the Standard and Poor's GSCI Index of 24 commodities, down 5.8 percent.
The fuel retreated 3.13 cents to $2.5951 a gallon on Jan. 16, the lowest settlement since Nov. 12, amid less driving demand and cold-weather forecasts. Nationwide consumption of gasoline fell 3.1 percent to 8.02 million barrels a day in the week ended Jan. 10, the lowest since Jan, 4, 2013, according to the U.S. Energy Information Administration.
Temperatures in New York, the delivery point for Nymex futures, may reach a low of 11 degrees Fahrenheit by Jan. 22, with Boston dropping into the single digits and Philadelphia and Washington hovering in the teens, according to MDA Weather Services in Gaithersburg, Md. Chicago may touch minus 4 and Atlanta will be in the 20s.
Regular gasoline, averaged nationwide, fell 0.3 cent to $3.284 a gallon Sunday, the ninth consecutive decline and lowest level since Dec. 26, according to data from Heathrow, Fla.-based AAA, the nation’s largest motoring group.
‘Cold and icy’
The winter weather helped drag pump prices lower across the U.S., according to Michael Green, a spokesman for AAA.
“The main reason gasoline prices are dropping is the significant declines we’re seeing in demand,” Green said by phone from Washington. “People don’t like driving when it’s dark, cold and icy outside so they’re not buying gasoline. We expect prices will remain flat as demand is weak.”
Gasoline consumption, which has posted a monthly decline every January since 1996, has fallen 9.8 percent, or 872,000 barrels a day, since the end of 2013, according to EIA data.
Futures slumped 2.23 cents, or 0.8 percent, to $2.6563 on Jan. 8, the first day of the report period, after the EIA said that East Coast stockpiles climbed 2.18 million barrels to 59.4 million in the seven days ended Jan. 3, the highest level since Aug. 9. Imports climbed by 127,000 barrels to 367,000, the first gain in six weeks.
Gasoline fell 1.37 cents to $2.6426 the following day as the Labor Department reported applications for unemployment benefits dropped 15,000 to 330,000 in the period ended Jan. 4, the fewest since November.
The fuel rebounded 2.65 cents to $2.6691 Jan. 10 as the Labor Department said December payrolls rose at the slowest pace since January 2011, boosting speculation the U.S. Federal Reserve will maintain its bond-buying pace to stimulate growth. The Fed, which will meet Jan. 28-29, announced in December a reduction of $10 billion in its monthly bond-buying program to $75 billion, citing a recovery in the U.S. labor market.
Gasoline retreated 3.5 cents on Jan. 13 and 1.17 cents on Jan. 14 to finish the report week at $2.6224 a gallon. Futures fell on speculation inventories would gain 2.5 million barrels in an EIA report released Jan. 15. The report showed stockpiles surged 6.18 million.
Net-long positions in Nymex gasoline tumbled 10,397 futures and options combined to 37,541, a second consecutive drop. Long positions fell by 3,224, while shorts increased by 7,173, the biggest percentage gain in 20 months.
In other markets, money managers’ bullish wagers on U.S. ultra-low-sulfur diesel slid by 12,903 futures and options combined, or 80 percent, to 3,303, the lowest since Nov. 19. Diesel tumbled 2.3 cents, or 0.8 percent, to $2.9363 a gallon during the report week.
Net-long wagers in West Texas Intermediate oil, the U.S. benchmark, dropped by 17,455 futures and options combined to 229,722, the lowest since Nov. 26. Long positions held by money managers, including hedge funds, commodity pools and commodity- trading advisers fell by 7,066 futures and options combined, while shorts climbed by 10,389.
Crude retreated $1.08, or 1.2 percent, to $92.59 a barrel in the reporting period ended Jan. 14. Prices increased 41 cents to $94.37 a barrel on Jan. 17 and were 64 cents lower today at $93.73.
Hedge funds and other money managers reduced bullish bets on Brent crude, the international benchmark, to the lowest level in 14 months, according to data from ICE Futures Europe.
Net-long positions in futures and options combined slid by 14,438 contracts to 85,658 lots. It was the second consecutive weekly reduction, bringing bets on rising prices down to their lowest level since Nov. 13, 2012.
Net-long wagers on four U.S. natural gas contracts rose by 1,965 futures equivalents, or 0.5 percent, to 384,599, the first increase in three weeks.
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
Natural gas futures rose 7 cents, or 1.6 percent, to $4.369 per million British thermal units on the Nymex in the period covered by the report.
“It’s been a mix of several things driving gasoline prices lower,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill. “Refiners are going to continue running and demand is going to stay soft. It looks to me like we’ll resume the downward move next week.”
— With assistance from Brian K. Sullivan in Boston.