UNG fund says cuts natgas position due CFTC moves
Wed Jul 29, 2009 5:14pm EDT
(Repeats to additional subscribers)
* UNG cutting positions in natural gas market
* Says may seek alternative investments
* Still weighing overall impact of CFTC position limits
(Adds details)
NEW YORK, July 29 (Reuters) - The United States Natural Gas Fund LP (UNG.P: Quote, Profile, Research, Stock Buzz) said on Wednesday it was reducing its position in the natural gas futures market to adhere to federal limits, adding that it may need to seek alternative investments to compensate.
The move by the giant exchange traded fund comes amid intensifying scrutiny of energy markets by lawmakers and regulators aimed at tamping down speculation that some blame for wild swings in the price of oil and gas in recent years.
The fund, which provides investors with exposure to the natural gas market without related margin calls associated with futures trade, has been rumored to at times hold as much as 80 percent of open interest in the front-month contract.
UNG said in a regulatory filing Wednesday that it was notified by the Intercontinental Exchange (ICE.N: Quote, Profile, Research, Stock Buzz) that the CFTC had determined to limit positions in the natural gas contract and that the new limits would apply to UNG.
The New York Mercantile Exchange is also setting position limits on some natural gas contracts, according to a notice it sent to its members in June. [ID:nN28167096]
"UNG is endeavoring to reduce its positions to comply with new limits placed by ICE on holdings in the LD1 Contract and, to the extent required, the position and accountability limits currently imposed by the New York Mercantile Exchange Inc on its natural gas futures contract, UNG's benchmark futures contract, and other related NYMEX natural gas futures contracts," the fund said in a filing.
Click here for the filing: [ID:nEOLu9zoiv]
A New York-based natural gas broker said the move could potentially hit futures prices, particularly if UNG was forced to sell-off a large portion of its position.
NYMEX natural gas futures NGc1 dipped 15.6 cents on Wednesday to $3.379 per million British thermal units.
The fund said that it may need to seek alternative investment vehicles, including over-the-counter swaps, to achieve the goal it is seeking for its investors.
"UNG may use alternative investments to meet its investment objective, including total return over the counter swaps that are intended to provide the economic equivalent of the return from ownership of the benchmark futures contract," it said.
UNG added that it may not be able to issue additional units for some time, and that it is still weighing the overall impact of the new position limits.
UNG, meanwhile, is awaiting a response from the Securities and Exchange Commission on a June 5 request to issue up to a billion new units.
A UNG official was not immediately available for comment. (Reporting by Eileen Moustakis, Joe Silha and Richard Valdmanis, 646-223-6056; Editing by Marguerita Choy)
© Thomson Reuters 2009. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. |
