Hedge funds’ net position in natural gas
On October 7, 2016, the CFTC (U.S. Commodity Futures Trading Commission) will release its weekly “Commitment of Traders” report for the week ending October 4, 2016.
On September 30, 2016, the CFTC released its weekly “Commitment of Traders” report for the week ending September 27, 2016.
The CFTC reported that hedge funds increased their net long position in US natural gas futures and options contracts by 12,456 contracts to 124,065 contracts from September 20–27, 2016.
Commercial and non-commercial traders
The CFTC divides traders into two categories—commercial and non-commercial. Hedge funds are considered non-commercial traders, while 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.
Open interest in natural gas
On September 30, 2016, the CFTC reported that open interest in US natural gas futures and options contracts fell for the third time in the last five weeks in the week ending September 27, 2016. Open interest fell by 28,285 contracts to 1,083,485 from September 20–27, 2016.
US natural gas futures and options contracts’ open interest peaked at 1,187,000 contracts in the week ending April 19, 2016—the highest level since June 2015.
Impact on energy companies and ETFs
Hedge funds’ bullishness or bearishness on natural gas prices could impact natural gas prices. The ups and downs in natural gas and crude oil prices impact oil and gas producers’ profitabilities such as EXCO Resources (XCO), Range Resources (RRC), and Antero Resources (AR).
Oil and natural gas prices also impact ETFs and ETNs such as the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), the PowerShares DWA Energy Momentum ETF (PXI), the VelocityShares 3x Long Crude Oil ETN (UWTI), and the First Trust ISE-Revere Natural Gas ETF (FCG).
Read the final part of this series for some natural gas price forecasts.