Marchwas a good month for bullish traders in natural gas, but concerns about thesustainability of the upside momentum in prices are emanating from the latestdata on so-called smart money accounts. The same large traders appeared tolighten up and reduce their positive bias in the crude oil market.

Datafrom the U.S. Commodity Futures Trading Commission's "Commitments ofTraders" report published on April 1 showed that the managed money netshort position in natural gas was reduced by 31,558 to reach 91,242 contractsin the week ended March 29. Prices increased 13.3 cents during the survey week.

Thebreakdown of trades suggests that short covering accounted for the majority ofthe reduction, with 24,352 short positions closed while 7,206 new longcontracts were opened. Short-covering can have a mixed impact on prices and hastended to indicate that the stability of an upward trend is uncertain aslong-term rallies are rarely built upon short covering.

Managedmoney accounts have unwound significant portions of their net short positionsince reaching a record net short of 233,984 contracts in the week ended Nov.3, 2015, although the majority of the reduction has come through short covering.

Betweenthat week and the weeks ended Nov. 3, 2015, and March 29, there were 115,492short positions closed while 27,250 longs were opened.

"Abottom may be in basis COT data only," Energy Management Instituteprincipal Dominick Chirichella said. "I am not sure we have seen a bottomyet with total natural gas inventories at record high levels for this time ofyear and the summer cooling season still an unknown. I believe the market isgoing to need a warmer-than-normal summer for prices not to look back at thelows formed earlier in the year."

Noncommercialaccounts reduced their net short position by 12,184 to reach 167,693 contractsin the week ended March 29. There were 7,199 long positions that were cut while19,383 shorts were reduced.

Datathat include options showed a similar sized net short, with questions about theimplications of the reduction in shorts being posed.

"TheCommitments of Traders Futures and Options report as of March 29th for NaturalGas showed non-commercial traders were net short 169,798 contracts, a decreaseof 11,797," analysts at Zaner said in a note on April 4. "Negativereversal action in May natural gas puts the short-term advantage in the bear'scourt."

Noncommercialtraders include those that are large enough to meet minimum position thresholdsbut are not involved in hedging, while the managed money category includesthose who engage in futures trades on behalf of investment funds or clients.Both are widely followed by traders and are considered to be the "smartmoney," as their positioning can track or sometimes lead changes in pricetrends.

Incrude oil, noncommercial accounts reduced their net long position by arelatively small 2,466 contracts and were net long 305,511. The upside momentumof prices and buying by smart money traders appears to have lost steam, asprices declined $3.13/bbl during the survey week.

Thebreakdown of trades was somewhat mixed with 6,799 new long positions and 9,265new shorts added.

Managedmoney accounts reduced their net long position by 16,904 to reach 209,182contracts. The addition of short positions was the main cause of the reduction,with 13,105 new shorts added while 3,799 longs were reduced.

"Thelatest CFTC data out on Friday showed that short positions held by speculatorsincreased for the first week in eight," Matt Smith, director of commodityresearch at ClipperData, said in a note. "The corresponding ICE data forBrent crude showed a similar trend, with short positions rising for the firsttime since early February. This reversal of sentiment could well be coincidingwith a move lower for oil prices once again."

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.