Questions are continuing to surface about the large futures market positions in natural gas that have been taken by the United States Natural Gas Fund, LP (UNG), an exchange-traded fund that is described as a pure play on the price of natural gas in the front-month futures contract.

There were reports in mid-May that the fund held as much as 80% of the June contract, although other analysts disagreed, saying that couldn’t possibly be true (see Daily GPI, May 15).

However, the fund now has large positions in the July contract. UNG listed its open interest at the end of business Tuesday as 18,585 July 2009 futures contracts on the New York Mercantile Exchange (Nymex), well above the limitation of 12,000 contracts. On the same day Nymex listed its open interest for the front-month contract at 143,489 contracts, which means UNG had 12.9% of the open interest for that contract on the exchange.

On the same day UNG also listed holdings of 85,746 July 2009 natgas swap contracts, which would equal about 21,400 Nymex contracts, and 92,662 natgas futures contracts on IntercontinentalExchange (ICE), the equivalent of another 23,000-plus Nymex contracts. UNG listed the total value of its natgas open interest on June 2 as $2,603,304,000.

Questioned as to why its holdings were above the limit, a spokesman said, “We’re a passive speculator, so Nymex is working with us on this.” Jim Stegal, manager of Institutional Sales/AP Relations at ALPS Fund Services, Inc. in Denver, said it had been Nymex’s suggestion that the fund diversify its holdings into swaps and ICE contracts. “Our impact on the natural gas price is very minimal, if at all,” he said, since most of its trades are block trades and all their trading is finished by 2:30 p.m.

One futures broker questioned whether the Commodity Futures Trading Commission (CFTC) was monitoring the UNG trades. “I know my clients get calls from the CFTC when their positions go above 200 contracts, which is a lot less than 18,000. This isn’t British Petroleum that moves a huge amount of gas. This is somebody that is like a retail mutual fund. Why should they get special treatment?”

Neither the CFTC nor Nymex had returned NGI‘s calls by press time.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.