NEW YORK -- The recent spike in natural gas prices has prompted U.S. regulators to subpoena the telephone records of natural gas traders in an effort to uncover any signs of market manipulation.
The Commodity Futures Trading Commission (CFTC), Washington, has asked traders at the New York Mercantile Exchange to submit telephone records dating back to Dec. 15, according to a report in Monday's edition of the Wall Street Journal.
A spokesman for the CFTC would not confirm whether an investigation had been launched, citing commission policy.
He did say that the CFTC had stepped up its surveillance of the natural gas market, based on recent price movements. "As part of our ongoing surveillance efforts, any time a market shows pronounced or unusual price movements we would step up our efforts to ensure that those price movements reflect supply and demand or legitimate trading and hedging activity," he said. "If we determine there is enough evidence to warrant issuing a formal complaint, that is when the process would become a matter of public record."
A Nymex spokeswoman declined to say whether the exchange had received a formal request for information from the CFTC, but she said Nymex was looking closely at the market. "We have our own self-regulatory role, and in a period of extreme volatility such as we have had recently we would certainly make sure to go over the market with a fine-toothed comb," she said.
The report said the CFTC was seeking records from all companies trading natural gas on the exchange rather than targeting individual firms or traders.
In the past month, natural gas prices on Nymex have shot to unprecedented highs for the time of year. In the first two weeks of December, futures prices jumped almost 40 percent to more than $7 per million British thermal units on what traders said were concerns over cold weather combined with technical trading factors. In previous years, however, price spikes of this magnitude typically occurred later in the winter, when lower storage levels made prices more sensitive to weather and other influences.
Natural gas traders said at the time that the price movements were due largely to a number of financial institutions rushing to cover large short positions as colder weather increased demand (AMM, Dec. 9).
The price spikes also prompted congressional concern of possible market manipulation. On Dec. 10, Sen. Orrin Hatch (R., Utah) announced that he would hold hearings into the price spikes, while on Dec. 30 presidential hopeful Sen. Joe Lieberman (D., Conn.) asked the CFTC and the Federal Energy Regulatory Commission for an investigation.
On Monday, February Henry Hub futures fell as the Northeast saw a brief respite from the weekend's extreme cold. At midday, natural gas was down 44.7 cents, or about 6 percent, at $6.840 per mm Btu--still about 40 percent higher than a year ago.
Kevin Foster
kfoster@amm.com
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