U.S. Natural Gas Fund Grows to Record on Demand Surge

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"The ETF can't grow further for now because yesterday it ran out of new shares to issue."

The United States Natural Gas Fund expanded today to the largest position in its 27-month history as investors snapped up the last of its shares and it awaited government approval to issue more units.

As of early today, the exchange-traded fund owned the equivalent of 124,926 natural gas futures contracts on the New York Mercantile Exchange. The number of shares outstanding reached a record yesterday, rising 14.5% to 322.3 million, more than 10 times the total at the start of the year, and worth $3.97 billion.

The fund's natural gas position, spread across swaps and futures on the Nymex and the ICE over-the counter market, equals the equivalent of 86% of the open interest in natural gas futures on the NYMEX.

"Clearly, this has become an extraordinarily attractive investment," said Dave Nadig, an associate editor at IndexUniverse.com, in Decatur, Georgia. "There's a lot of speculation among people like us who are wondering who is in this."

The ETF can't grow further for now because yesterday it ran out of new shares to issue. The ETF asked the Securities Exchange Commission on June 5 for permission to create 1 billion new shares, and is awaiting approval.

John Heine, spokesman for the SEC, said yesterday the timeline for approval varies from case to case.

The fund rose 2 cents, or 0.2%, to $12.20 on the New York Stock Exchange. It's down 47% this year, while natural gas has fallen 40% on the Nymex.

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