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How Weather and Inventories Are Pressuring Natural Gas Prices

PART:
1 2 3 4 5 6 7 8 9
Part 8
How Weather and Inventories Are Pressuring Natural Gas Prices PART 8 OF 9

Hedge Fund Net Long Positions in Natural Gas Fell from 2016 High

Hedge funds’ net positions in natural gas 

On November 4, 2016, the CFTC (U.S. Commodity Futures Trading Commission) will release its weekly Commitment of Traders report for the week ended November 1, 2016.

On October 28, 2016, the CFTC reported that hedge funds decreased their net long positions in US natural gas futures and options contracts for the second time in the last seven weeks for the week ended October 25, 2016. Hedge funds decreased their net long positions in US natural gas futures and options contracts by 10,416 contracts to 137,031 contracts during the week. Net long positions hit 147,447 for the week ending October 18, 2016, the highest level so far in 2016.

Hedge Fund Net Long Positions in Natural Gas Fell from 2016 High

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Commercial and non-commercial traders 

The CFTC divides traders into two categories: commercial and non-commercial. Natural gas producers and consumers are considered commercial traders, while hedge funds are considered non-commercial traders. Commercial traders use the futures and options markets for hedging activity to offset natural gas price volatility.

Open interest in natural gas 

On October 28, 2016, the CFTC reported that open interest in US natural gas futures and options contracts fell for the second time in the last five weeks in the week ended October 25, 2016. Open interest fell by 39,746 contracts to 1,173,893 during the week. Open interest hit 1,213,639 for the week ending October 18, 2016, which was its highest level since June 2015.

Impact on energy companies and ETFs 

Hedge funds’ bullishness or bearishness on natural gas prices could impact prices. For more on natural gas prices, read part one of this series. Volatility in natural gas and crude oil prices can impact the profitability of oil and gas producers such as Gulfport Energy (GPOR), Southwestern Energy (SWN), Newfield Exploration (NFX), and Antero Resources (AR).

Uncertainty in crude oil and natural gas prices can also impact ETFs and ETNs such as the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the PowerShares DWA Energy Momentum ETF (PXI), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the VelocityShares 3x Long Crude Oil ETN (UWTI), and the First Trust ISE-Revere Natural Gas ETF (FCG).

For details on hedge fund positions in US crude oil futures and options, read Hedge Funds’ Bullish Position in US Crude Oil Fell.

In the final part of this series, we’ll look at some natural gas price forecasts.

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