On September 2, 2016, the CFTC (U.S. Commodity Futures Trading Commission) will release its weekly Commitment of Traders report for the week ended August 30, 2016.
On August 26, 2016, the CFTC reported that open interest in US natural gas futures and options contracts fell for the first time in four weeks in the week ended August 23, 2016. Open interest fell by 30,000 contracts to 1,096,000 from August 16 to August 23, 2016.
Open interest in US natural gas futures and options contracts hit 984,000, the lowest level since February 2016, in the week ended July 26, 2016.
US natural gas futures and options contracts’ open interest peaked at 1,187,000 contracts in the week ended 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 considered non-commercial traders, and natural gas producers and consumers are considered commercial traders. Commercial traders use the futures and options markets for hedging activity to offset natural gas price volatility.
According to the CFTC, hedge funds reduced their net short positions in US natural gas futures and options contracts from 35,431 contracts to 35,338 contracts from August 16 to August 23, 2016.
Hedge funds reduced their net short positions in natural gas futures and options contracts for the first time in three weeks in the week ended August 23, 2016. The data for August 30, 2016, will be released on September 2, 2016.
Hedge funds’ net short positions hit their lowest level since June 2015 at 29,000 contracts in the week ended June 28, 2016.
Impact on energy companies and ETFs
Hedge funds’ bullishness or bearishness on natural gas prices could impact natural gas prices. Volatility in natural gas and crude oil prices impacts the profitabilities of oil and gas producers such as Rex Energy (REXX), Memorial Resources (MRD), and Antero Resources (AR).
Prices also impact ETFs and ETNs such as the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the United States Natural Gas ETF (UNG), the First Trust ISE-Revere Natural Gas ETF (FCG), and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
Read the final part of this series for some natural gas price forecasts.