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Open Interest in US Natural Gas Contracts Rose for the 2nd Week

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Open interest 

The CFTC (U.S. Commodity Futures Trading Commission) will release its weekly “Commitment of Traders” report on August 19, 2016, for the week ending August 16, 2016. On August 12, 2016, the CFTC reported that open interest in US natural gas futures and options contracts rose for the second straight week in the week ending August 9, 2016. Open interest rose by 49,169 contracts to 1,083,435 from August 2-9, 2016.

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Open interest in US natural gas futures and options contracts hit the lowest level of 984,024 since February 2016 in the week ending July 26, 2016. US 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.

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.

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Hedge funds 

The CFTC reported that hedge funds increased their net short positions in NYMEX natural gas futures and options contracts by 22,158 contracts to 53,279 contracts from August 2-9, 2016.

Hedge funds increased their net short positions in natural gas futures and options contracts for the fifth time in the last six weeks in the week ending August 9, 2016. The data for August 16, 2016, will be released on August 19, 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 ups and downs in crude oil and natural gas prices affect the profitability of oil and gas producers such as Rex Energy (REXX), Exco Resources (XCO), and Antero Resources (AR).

Prices also affect ETFs and ETNs such as the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the First Trust ISE-Revere Natural Gas ETF (FCG), 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 some natural gas price forecasts.

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