US hedge fund charged in natgas futures scam
25 July 2007 22:05 [Source: ICIS news]
HOUSTON (ICIS news)--A US regulator on Wednesday filed charges against a hedge fund and its head energy trader for attempted manipulation of natural gas markets - an issue that is a thorn in the side of the US chemical industry.
The Commodity Futures Trading Commission (CFTC) alleged that in February and April of 2006, Amaranth Advisors and its head trader, Brian Hunter, acquired 3,000 natural gas futures contracts on the NYMEX.
The regulator contends that subsequent sales of those contracts were timed to drive down the settlement prices on the days when the February and April contracts expired.
The CFTC said the ploy was intended to boost the value of much bigger short positions in financially settled swaps. Those swaps were primarily traded on the IntercontinentalExchange (ICE), an Atlanta-based rival to NYMEX.
The settlement price of the ICE swaps is based on the NYMEX natural gas futures settlement on the dates when the NYMEX contracts expire.
Amaranth has been in the spotlight since it collapsed in September 2006, with more than $6bn (€4bn) in losses from natural gas trading.
It has been the subject of probes by several regulators and by the US Congress and is being sued by investors who lost money in the collapse.
Senate hearings that began in June brought calls for greater scrutiny of natural gas trading and of the exchanges. US chemical firm Huntsman's chief executive Peter Huntsman in particular has been outspoken on the issue of market manipulation.
The availability and pricing of natural gas is crucial to US chemicals manufacturers because they are largely dependent on gas as a feedstock.
Some chemical producers have argued that the three-fold increase in US natgas prices over the last five years is due chiefly to speculative trading rather than normal supply-demand factors.
($1 = €0.72)
By: Stephen Burns
+1 713 525 2653
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