US natural gas markets in confusion

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Natural gas is a major feedstock for US chemical producers. So the problems caused by the rush to buy a fund that “invests” in the natural gas futures market, are a concern.

Olivier Jakob of Petromatrix has been warning for some time that the UNG fund was becoming too large. Investors have been so keen to bet on rising commodity markets, that it now represents 70% of open interest in the nearby futures contracts! As a result, the market itself has become dysfunctional, and UNG is being forced to close some of its positions.

The UNG problem is another example of rampant speculation in financial markets. When this happens, it usually ends in tears

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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