The Commodity Futures Trading Commission (CFTC) is remaining tight lipped about a reported examination of Nymex natural gas futures trades made in advance of the Energy Information Administration’s (EIA) Feb. 7 storage report for the week ending Feb. 1.
“We neither confirm nor deny that we are looking into the matter, as the CFTC declines to comment on surveillance and enforcement activities,” a CFTC spokesman told NGI.
According to published reports, the commission is examining trades made by specific firms in the minutes prior to the release of EIA’s gas inventory number at 10:30 a.m. EST on Feb. 7. For the week ending Feb. 1, the EIA reported a withdrawal of 118 Bcf from storage inventories, and once the number was released, March futures dropped, reaching a low of $3.341 (see Daily GPI, Feb. 8). By 10:45 a.m., March was trading at $3.368, down 5.0 cents from Wednesday’s settlement. Prior to the report’s release, expectations were varied, but consensus estimates were generally for a larger than 118 Bcf draw.
Circumstances surrounding the release and trading that morning were immediately questioned by some traders.
“About 10:29 and 45 seconds this market started tanking. Somebody got hold of it [the data],” a New York floor trader told NGI shortly after the EIA number was released. “This is not a good sign. Something is in the mix.”
But reports of unusual trades just prior to release of EIA’s storage report don’t necessarily imply wrong-doing, according to Tom Saal, vice president at INTL FC Stone in Miami.
“Somebody may have just bought a bunch of contracts early, or sold a bunch of contracts early, and they didn’t even know what the number was. That’s one possibility, that there’s nothing there, other than just coincidence,” Saal told NGI. “I’ve always thought that even if you knew the number, you still have a little bit of risk, that your assessment of the direction may be wrong — even if you knew the number. As a prudent trader, I’d probably want at least to see for a second or two that someone else is agreeing with me before I put the trade on.”
EIA “is committed to providing fair access to the information disseminated through [its] website,” but as an energy statistical and analytical agency, it does not investigate market trading activity, an EIA spokesman told NGI.
“EIA closely monitors its critical data releases and the measures taken to ensure the integrity of the data releases continue to perform as intended.”
In 2004, CFTC carried out an industry-wide review of major natural gas storage owners and operators to determine if they may have over- or under-reported their storage withdrawal estimates to the federal government to such an extent that it influenced gas futures prices (see Daily GPI, May 14, 2004).
The agency and the Federal Energy Regulatory Commission, which cooperated in the investigation, subsequently said they had found no evidence of manipulation in sharp upward movement of natural gas prices in late 2003 (see Daily GPI, Aug. 31, 2004). The CFTC blamed fundamentals, including the sudden onslaught of cold weather and storage projections, for the price jumps.
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