The NYMEX natural gas futures contract reached seven consecutive record high open interest levels during the period from March 15 to March 25, Chicago-based CME Group said Tuesday.
The first record at 1,316,945 contracts posted on March 15 was the highest level of gas open interest since April 2012, CME Group said.
Following that, gas contract open interest rose to 1,320,785 contracts on March 18, to 1,340,116 on March 19, to 1,348,337 on March 20, to 1,373,204 on March 21, to 1,398,141 contracts on March 22, and to 1,399,967 contracts on March 25, CME said.
This was the time period when the benchmark gas futures contract was trading close to the $4/MMBtu level, and at times reaching above $4/MMBtu intraday, on colder-than-average end of winter.
According to sources, record high open interest reflects a rebalancing of the supply-and-demand scenario that took place recently, due to below-average temperatures and less gas in storage.
The runup in open interest also coincided with high level of net length accumulated by money managers. The gas market was trading "within swiping distance of four dollardom" with a "bullish state of mind being encouraged by [most recent Commodity Futures Trading Commission] data, which showed net-long positions by money managers reaching their highest level in over three years," said Schneider Electric analyst Matt Smith.
According to CFTC data for the week ended March 19, the position of money managers shifted from being 50% long to 54% long, with 291,772 long positions and 247,720 short positions.
The composite natural gas data compiled by Citi Futures Perspective analyst Tim Evans, which includes ICE Henry Hub, Henry Hub NYMEX swap, Henry Hub NYMEX Penultimate swap and European style natural gas options, shows that managed money net long positions increased by 71,791 contracts during the week ended March 19, to a new record of 377,844 contracts.
"The flow is supportive for prices while it lasts, but the market is increasingly overbought," said Evans.
