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Data shows oil, gas smart money comfortable at current prices

Asprices of crude oil and natural gas have held in a fairly sideways directionover the past week, smart money traders generally appear to have opted to standaside waiting for new fundamental or technical drivers to push prices out oftheir recent trading ranges.

Datafrom the "Commitments of Traders" report published by the U.S.Commodity Futures Trading Commission on July 15 showed that noncommercialtraders in crude oil liquidated 4,877 contracts from their net long position toreach 294,795 contracts in the week ended July 12. It was the smallest net longposition since the week ended May 10.

Thereduction was made through the selling of 3,224 long positions while shortsadded 1,653 contracts. Prices gained 20 cents during the survey week.

Activityin managed money accounts moved in the opposite direction, as the net longposition expanded by 9,164 to reach 154,529 contracts. The change was madethrough the addition of 5,653 new long positions while shorts were reduced by3,511 contracts.

"Thethree main forecasters, EIA, IEA and OPEC, all continue to suggest that themarket is already in a rebalancing pattern, and supply and demand should be insync as early as the first half of 2017," Energy Management Instituteprincipal Dominick Chirichella said. "On the other hand, the short term orcurrent global fundamentals are mixed at best."

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.

Innatural gas, figures on noncommercial traders were slightly bearish whilemanaged money accounts were fairly neutral. The activity could suggest thattraders are comfortable at current price levels or waiting for the next inputfrom the fundamental side.

Noncommercialaccounts added 3,576 to their net short position to reach 138,868 contracts.The addition was made through 1,595 new short positions while longs werereduced by 1,981 contracts. Prices fell 3.0 cents during the survey week.

"Thespot Nymex Nat Gas contract will have to move back above the $2.80/MMBtu levelfor market participants to be convinced that the new up leg is underway,"Chirichella said. "From a technical perspective the market may once againbe starting to look like it is back in a technical breakdown."

Managedmoney accounts subtracted 127 from their net short position to reach 30,251contracts. There were 1,780 long positions cut while shorts fell 1,907contracts.

Managedmoney accounts have generally been reducing their net short position since arecord 233,984 contract net short was reached in the week ended Nov. 3, 2015.Their positioning has been somewhat stagnant for the last several weeks.

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.