US natural gas futures fall for sixth month

Year-over-year average daily volume (ADV) in US natural gas futures and options on the New York Mercantile Exchange (NYMEX) fell for a sixth month in a row in July, according to data from CME Group Inc, which owns the NYMEX. Analysts said the volume decline was due to a lack of price volatility over the past several months since both futures and options hit record volumes in January.
"The lack of price volatility since the spring has not been attractive to heavy trading," said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. Gas futures have mostly traded between $2.75 and $3.00 per million British thermal units since March.
The large amounts of gas being produced in the United States are limiting any worries of supply risk that would drive prices higher, McGillian said, and the low storage levels due to a particularly cold winter has set a basement for prices. US gas production is at a record high, while inventories are about 20 percent below normal for this time of year.
In July, futures ADV fell to 337,696, down 10.1 percent from the same period a year earlier. That was well short of the monthly futures ADV record of 675,650 set in January.
Year-to-date futures ADV was 422,486 up 1.0 percent from the same period a year earlier. Futures ADV hit an annual record of 431,840 contracts in 2017. "Despite low levels of volatility, open interest in our NYMEX Henry Hub gas futures has grown to near-record levels in 2018," said Neil Somma, CME Group executive director of energy products.
Open interest on Monday reached 1,578,357 contracts, the fourth-highest on record. That compares with an all-time high of 1,594,382 on April 18, 2013, according to CME data. "Our Henry Hub contract is well positioned to help customers manage risk in the event volatility increases during the second half of 2018," Somma said.
Financially settled European-style options ADV fell to 56,217 in July, down 36.7 percent from the same period in 2017. That was well short of the monthly options ADV record of 200,736 set in January. Year-to-date financially settled European style options ADV was 83,157, down 23.9 percent from the same period a year earlier. Options ADV hit an annual record of 112,763 contracts in 2017.