Looking at the Nymex site, it looks like there's only 145k contracts open. So does UNG control 67% (or whatever the math turns out to be) of August NG??? I see several reports citing the 100k contracts long figure. That's pretty ridiculous. They must be hating life these last couple of days, with the trajectory of Aug gas...
UNG will start their rollover July 15, 2009 through July 20, 2009. It will be ugly for them with this contango. I Don't usually trade NatGas, cause im busy trading Crude and Destillate spreads, But professional NatGas spreader like Papa Roach (great post btw) may take advantge of this next week.
Some Fresh News. By Danny Devito.- The United States Natural Gas Fund, temporarily suspend issuing new shares pending regulatory approval to expand the number of shares it can issue to 1.2 billion. The U.S. Natural Gas fund filed on June 5 with the SEC for permission to issue 1 billion new units, adding to the previously approved 200 million units. The long-only exchange traded fund's move to massively expand the number units it can issue has sparked concerns among market players who say the jump in the number of units may open the natural gas market to more speculation and influence prices when it rolls positions on the futures market from month to month. On Monday, UNG had 32.1 million units left of the 200 million it is authorized to issue." This is the news of today, what to say? Scenario 1. SEC will approve, and the UNG can collect 5/6 times more money to buy more and more gas, and somewhere... they will seek a profit and this mean a gas price higher. Scenario 2. SEC won't approve in the near future living UNG like a close funds, if I don't wrong, and this mean that when investors will need to buy shares of UNG cannot do other then buy the existing shares and with few sellers can mean the price of gas that will even raise/rally faster like in a fast market or with moves of 20% in a single days as already did some week ago. What do you think about what is happening? Can seriously SEC don't approve the issue of shares with the temporary excuse that the influence of the gas fund on rollover can influence the stability of the futures in the rollover seen that USO and UNG are the majoir market movers of those futures contracts seen the high number of contracts accumulated (and recently the USO has seen decrease massively the number of position while UNG increasing seen that investors where looking to the unique commodity still near the lows)?
As of today, they hold roughly 120,000 contract equivalents. That is split up between futures, henry hub swaps and ICE futures. They are holding 27,000 lots of NYMEX futures. The roll is going to be rediculous!
I lean towards the SEC denying more shares, the CFTC is already trying to crack down on large traders that influence the market and will likely be putting position limits in effect soon. UNG trading with no more shares will still be linked heavily to the futures via arbitrage, if no more shares are created. I think the fact that UNG cannot issue more units now and therefore cannot buy more derivative contracts, is a bearish dynamic. The loss of the daily bid from UNG and having a vehicle that is max long now looks like something that could be an easy pickoff for larger futures trading funds. Kind of like when Amaranth got fully margined on a bad trade, nothing but pain. I would not be all that suprised to see natty really accelerate on the downside now. Here's praying to the spread gods that Q/U blows out to .30+!!
Can you explain to a layman why the V-X spread is so wide (around 0.70). Is that due to seasonal factors?
That is exactly what it is, seasonal factor of storage. We are threatening to run out of storage space before heating loads take up the slack in november, so oct is getting discounted nicely.
Based on the storage number just released the production cuts may slowly be having an impact. The last few reports have impacted the percentage in storage above last year's level. Does anyone have any comments or data about this? And by data I mean in addition to the weekly NG storage report. Thanks.
You cannot really measure storage on a year over year basis as weather is the key influence. So the analysts have "weather adjusted" analysis based on temps for this week this year and temps last year in the corresponding week. Right now, weather adjusted injections are neutral to last year, which is not bullish. We have had incredible heat in Texas, heat we have not seen since 1980, when shoes were getting stuck in asphalt. Also to note in this weeks # was a low point in LNG for that week and a pullback in Canadian imports, which both gyrate around quite a bit. Early estimate for next week is around +100.