July 7 (Bloomberg) -- The United States Natural Gas Fund, the largest exchange-traded fund in the fuel, said today that it has run out of new shares as it awaits government approval to issue more units.

The fund applied with the U.S. Securities and Exchange Commission to register 1 billion new shares on June 5. The wait will temporarily halt the fund’s recent growth. Outstanding shares have increased to 281.4 million, more than eight times the level at the start of the year.

The flood of money into energy futures has raised concerns among regulators that investors are influencing the price of fuel. The Commodity Futures Trading Commission said today it may clamp down on oil and gas price speculators by limiting the holdings of energy futures traders, including index and exchange-traded funds.

“In particular today, when the CFTC announced that it is reviewing position limits, there’s no guarantee that they’ll get those shares,” said Paul Justice, an ETF strategist with Morningstar Inc. in Chicago.

Trading of the units was suspended pending the company’s filing today with the SEC. Trading resumed after 2:20 p.m. The fund fell 38 cents, or 3 percent, to $12.18.

The Alameda, California-based natural gas fund has seen its popularity soar in recent months as investors staked out positions in natural gas. The price of the fuel has dropped 40 percent this year.

Growing Popularity

The fund’s position in natural gas grew with its popularity. At of the close of business yesterday, the fund held 18.7 percent of the open interest in August natural gas futures on the New York Mercantile Exchange, in addition to 51,746 natural gas swaps on NYMEX and 244,432 natural gas swaps on the ICE over-the-counter market, according to the fund’s Web site.

The fund needs approval to issue new units from the CFTC, the Financial Industry Regulatory Authority and the National Futures Association as well as the SEC, according to John Hyland, the fund’s chief investment officer.

John Heine, a spokesman for the SEC, declined to comment.

The fund has an open-ended number of shares. It creates new shares or redeems outstanding shares in baskets of 100,000. The fund then invests the money in near-month natural gas futures, rolling the contracts forward to the second month as the near month approaches expiration.

Without the ability to issue new shares, the fund may begin trading like a closed-end fund with significant premiums or discounts from the value of its underlying assets, Justice said.

“Until the issues are resolved, I would consider the situation riskier than it was just a month ago,” Justice said.

The natural gas fund was begun in April 2007 by the United States Commodities Funds LLC. The company launched United States Oil Fund, the first and still largest exchange-traded fund in oil in April 2006. It also has funds in heating oil, gasoline and a fund that buys a 12-month strip of oil futures. It has applied with the SEC to create a new fund that shorts oil.

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Last Updated: July 7, 2009 17:23 EDT