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Open Interest in US Natural Gas Contracts Rebounds

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Open interest

On August 12, 2016, the CFTC (U.S. Commodity Futures Trading Commission) will release its weekly “Commitment of Traders” report.

On August 5, 2016, the CFTC reported that open interest in US natural gas futures and options contracts rose for the first time in six weeks in the week ending August 2, 2016. Open interest rose by 50,242 contracts to 1,034,266 between July 26, 2016, and August 2, 2016. Open interest hit the lowest level of 984,024 since February 2016 in the week ending July 26, 2016.

NYMEX natural gas futures and options contracts’ open interest peaked at 1,187,000 contracts in the week ending April 26, 2016. This was the highest level since June 2015.

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Commercial and non-commercial traders  

The CFTC divides traders into two categories—commercial and non-commercial. Hedge funds are non-commercial traders and natural gas producers and consumers are commercial traders. Commercial traders use the futures and options markets for hedging activity to offset natural gas price volatility.

Hedge funds 

The CFTC reported that hedge funds decreased their net short positions in US natural gas futures and options contracts by 11,923 contracts to 31,121 contracts between July 26, 2016, and August 2, 2016.

Hedge funds reduced their net short positions in natural gas futures and options contracts for the first time in last five weeks in the week ending August 2, 2016. The data for August 9, 2016, will be released on August 12, 2016.

Hedge funds’ net short positions hit their lowest level since June 2015 at 56,000 contracts in the week ending April 19, 2016.

Impact on energy companies and ETFs  

The rollercoaster ride in crude oil and natural gas prices impacts oil and gas producers’ profitability such as WPX Energy (WPX) and Memorial Resources (MRD).

It also impacts ETFs and ETNs such as the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the United States Natural Gas ETF (UNG), and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).

Please read the final part of this series for the EIA’s natural gas price forecasts.

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