(Bloomberg) – Investment funds are exhibiting their most optimistic stance towards European natural gas since the beginning phases of the energy crisis, indicating mounting concerns regarding dwindling supplies despite the arrival of summer. This development was revealed in weekly data released by Intercontinental Exchange Inc., which showed that the net long position in benchmark Dutch gas futures maintained by investment funds increased for the fourth consecutive week, reaching its highest level since February 2022, which coincided with Russia’s attack on Ukraine and a surge in gas prices approaching record levels.
Trading activity in options is also reflecting bullish sentiment, with investors acquiring contracts that stand to benefit from an increase in gas prices and broader market volatility during the current week. This significant wager, which could potentially lead to substantial gains or losses, was recorded on Wednesday afternoon, according to data compiled by Bloomberg.
Market participants seem anxious about potential supply disruptions and geopolitical risks, coupled with heightened competition from Asian importers for liquefied natural gas (LNG) cargoes, as Europe strives to replenish its stockpiles ahead of winter. Moreover, there are uncertainties surrounding remaining Russian flows via Ukraine, while a harsher-than-expected winter is viewed as increasingly probable following two mild winters in succession. While subdued industrial demand and higher renewable power output have managed to keep prices under control, volatility has remained a salient feature of trading since the continent lost the bulk of its pipeline imports from Russia some two years back, with European countries currently depending on a range of global suppliers to meet their needs.
The aforementioned trade entailed purchasing over 17,000 €40 call options for October, which represents the start of the heating season in Europe, whilst simultaneously disposing of an equal number of €25 put options and roughly half as many futures in order to offset potential losses.
This deal can be interpreted as a speculative bet on a price hike in natural gas during the upcoming winter, which should subsequently elevate implied volatility. The trade was deemed noteworthy due to its size relative to Europe’s options market and emerged on the heels of a similar transaction involving more than 100,000 call options transacted on Intercontinental Exchange Inc. On Tuesday, representing the highest volume witnessed in this segment since at least 2020, as per Bloomberg data. In the previous week, the largest increases in open interest were seen in call options linked to maturity dates between October 2025 and March 2026, particularly those valued at €50.
This report was generated using automation technology.
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