Nearby futures gained modestly and more deferred contracts posted narrow losses Monday as traders squared their books prior to Tuesday’s options expiration and Wednesday’s futures termination.

Overall interest in the market by funds and managed accounts decreased during the latest reporting period, according to government figures. At the close August futures rose 3.2 cents to $4.612 and September added 2.0 cents to $4.583. All other contract months past November declined. September crude oil settled unchanged at $78.98/bbl.

“Today was a bookkeeping, pre-expiration, pre-options day, but traders are trying to get comfortable with a ‘sell-the-rallies’ approach to the market,” said a New York floor trader. He added that it “still looks like there are some large fund shorts in August, and they were buying August and selling September futures. That is why you saw that spread narrow in today.”

“On an outright basis there wasn’t a lot of activity, but there was lots of activity in the spreads, and rolling positions.”

Tuesday is options expiration, and typically benchmark prices such as $4.50 or $4.75 strike prices could see defensive trading by options dealers who have sold out-of-the-money options such as the $4.50 puts or $4.75 call options. With a settlement right in the middle, however, prices may not be close enough to prompt aggressive traders to try and push the market higher and put the $4.75 calls in the money, or push it lower to make the $4.50 puts in the money. “It’s heads or tails, north or south. We are in kind of a no-man’s land,” the trader said.

“One thing I have noticed on days like today is how the larger funds are sitting. The market senses the big short out there, and they sometimes try to run the market contrary to what that position is. They try to get in front of [buy ahead of] the funds,” he said.

There may not be as many of the big fund short positions as there used to be. Whether its frustration with the inability of abundant supplies to push prices lower, funds and managed accounts concerned only with the directional nature of prices and not attempting to offset a physical position exited both the long and short side of the market, according to recent government figures.

For the five trading days ended July 20, the Commodity Futures Trading Commission in its Commitments of Traders Report showed that traders on both IntercontinentalExchange (ICE) and the New York Mercantile Exchange (Nymex) exited both long and short positions in nearly equal numbers. When normalized to a 10,000-MMBtu contract, long holdings on both exchanges dropped by 11,224 and short holdings fell by 11,458.

At ICE long futures and options (2,500 MMBtu) fell by 28,372 to 238,767 and shorts declined 234 to 22,259. On Nymex long futures and options (10,000 MMBtu) dropped by 4,131 to 133,621 and shorts slid 11,400 to 197,086. For the five trading days ended July 20 August futures rose 23.6 cents to $4.590.

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