Concerns UNG ETF gas fund driving price may be overblown

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May 13, 2009 6:24pm NYSE:UNG

naturalgas1NEW YORK, May 13 (Reuters) – Recent concerns that growth in the United States Natural Gas Fund (UNG.P) (UNG) has been the primary driver behind the strong gas price run-up this month may be overblown, some industry analysts said.
Some analysts have estimated UNG could hold as much as 80 percent of New York Mercantile Exchange June natural gas open interest, stirring concerns that such a huge share could impact price volatility.

But some said the share was probably a lot lower.

“There’s been a lot of attention paid to the growing open interest held by UNG, but it’s completely disingenuous to say that it currently represents 80 percent of the futures market. That completely overstates the case,” said Addison Armstrong, director of market research at Tradition Energy in Connecticut.

Armstrong noted that data from May 12 showed UNG held the June futures equivalent of about 42,000 contracts, or only about a quarter of the NYMEX June gas open interest, which includes both swaps and futures contracts.

UNG is an exchange-traded fund, or ETF, that tracks the price of natural gas futures on the New York Mercantile Exchange. It’s one way for smaller players to invest in commodities like gas by buying shares in the fund without worrying about margin calls if their bet goes wrong.

Full Story: http://www.reuters.com/article/marketsNews/idUSN1341396420090513



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