Commissioner Sharon Brown-Hruska of the Commodity Futures Trading Commission (CFTC) signaled last week that the agency has found that market fundamentals, rather than trader wrongdoing, was behind the run-up in Nymex natural gas futures prices over the winter months.
“While I cannot comment on any specific investigation, I would note that in our weekly surveillance briefings on the gas and crude oil markets, there is a lot of evidence that simple economic fundamentals are what is behind the price movements we have seen in the last six months,” she said during a conference sponsored by the National Energy Marketers Association (NEMA) last Thursday.
“Particularly with respect to natural gas, we experienced an unusual gap between expected storage drawdowns and actual storage that gave rise to significant uncertainty during the winter months. Futures price this kind of uncertainty.”
Greg Mocek, the CFTC’s director of enforcement, said last week the agency’s three-month investigation into gas prices still was “ongoing.” He declined to comment on the findings of the inquiry so far (see Daily GPI, April 2).
The investigation is focusing on the escalation in gas futures prices that began shortly after Thanksgiving. Prices went from $4.92/Mcf on Nov. 26, 2003 to a high of $7.63 in mid-January in after-hours Access trading. Prices moderated in late January and early February, but began to climb again later that month. Gas futures for the May contract closed at $5.804 last week.
The CFTC in January subpoenaed the phone records of Nymex gas futures traders to look for any signs of collusion or market manipulation in the period following Thanksgiving (see Daily GPI, Jan. 13). The investigation apparently was not targeting individuals, but instead examined the activities of the entire gas futures trading pit over the time frame during which gas prices rose sharply.
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