(John Kemp is a Reuters market analyst. The views expressed are his own)
* Chartbook: tmsnrt.rs/2p8JNuE
* Coal shipments: tmsnrt.rs/2pWrmMm
By John Kemp
LONDON, April 24 (Reuters) - Hedge fund managers have accumulated a near-record bullish position in U.S. natural gas futures and options as gas stocks have remained at a modest level despite an exceptionally mild winter.
Hedge funds and other money managers have boosted their net long position in the two main futures and options contracts for seven consecutive weeks by a total of 1,313 billion cubic feet.
By April 18, fund managers had accumulated a net position equivalent to 3,511 billion cubic feet, the highest for three years, according to data published by U.S. Commodity Futures Trading Commission.
Fund managers show a strong bullish bias, with long positions outnumbering short positions by 4.3:1, up from a recent low of 2.2:1, and the highest ratio since February 2014.
Funds have reacted to signs of tightness in the gas market as a result of sluggish production, strong exports and a structural increase in gas demand from new combined-cycle power plants.
Working gas stocks have finished the winter around 380 billion cubic feet, or 15 percent, below the same point last year even though temperatures have been slightly warmer.
But the concentration of long positions has increased the risk of a sharp correction if funds try to take profits following the recent increase in prices.
The correction may already be underway with both flat prices and the calendar spreads under pressure in recent sessions.
Futures prices for gas delivered to Henry Hub in June 2017 have fallen from a recent high of $3.33 per million British thermal units on April 7 to $3.19 on April 21.
And the calendar spread between June 2017 and June 2018 has dropped from 53 cents on April 6 to just 27 cents on April 21.
The sustained increase in gas prices is likely to cause power producers to run their gas-fired units for fewer hours this summer and increase the utilisation of coal plants.
Higher U.S. gas prices have already made it more economically attractive to run coal-fired units despite their lower efficiency and flexibility.
U.S. coal shipments by rail have risen by 18 percent so far this year compared with the same period in 2016, according to the Association of American Railroads (tmsnrt.rs/2pWrmMm).
Coal production has likely increased by a similar percentage, according to the U.S. Energy Information Administration.
Some of the increase in shipments reflects the clearing of excess stocks at power plants that built up between 2014 and 2016.
However, some of the increase likely reflects plans to run coal-fired units for more hours during the summer of 2017 to meet air-conditioning demand.
Power producers have been gradually shifting from gas to coal burning since October 2016 as a result of higher gas prices.
Gas prices may need to rise even further to ration consumption by power producers if gas drilling and output fail to pick up and exports remain high.
But prices could also struggle if coal continues to make inroads into power-market share and summer air-conditioning demand falls significantly short of 2016 levels.
Editing by Susan Thomas