Open Interest

The CME natural gas futures market has been trading in a narrow 40 cent range between $3.40/MMBtu and $3.80/MMBtu since the end of the summer. The onset of winter and the first storage withdrawals last week (according to EIA) have done little to jump start prices. The prompt Henry Hub futures market closed at $3.702 yesterday (November 21, 2013). The dominating story remains increased supply from new production. Today we look at how supplies are weighing on spot prices and futures market speculation.

Last week (March 18, 2013) the CME NYMEX Henry Hub futures contract open interest reached a record 1.32 MM contracts. The previous high was in April 2012. Open interest represents the number of positions held by futures market participants that are not yet offset by another transaction, by delivery or by exercise. Today we look at what lies behind the run up in natural gas futures traffic.

Natural gas futures surged over 12 percent on Thursday to close at  $2.49/MMbtu following an unexpectedly bullish EIA storage report. Analysts interpreted the storage numbers as evidence that coal to gas switching in the power market has not yet reversed as we enter the summer peaking season.  The next market report to hit trader’s desks after the EIA storage numbers is the Commodity Futures Trading Commission (CFTC) Commitment of Traders (COT) analysis released later today (Friday). In today’s blog “The Long and Short of It – COT Reporting” Sandy Fielden takes a deeper look at the value of the COT report.