Feds Investigate Natural Gas Price-Fixing Allegations

Feb 16th, 2013 | By Mark | Category: Lead Articles, Regulation

NatGas Consulting

Federal regulators are investigating irregular price swings in the natural gas markets, according to a story published in the Wall Street Journal recently. Image credit: www.123rf.com

Federal regulators are looking into volatile price swings in the natural gas commodities market that occurred during the past 12 months in connection with the release of weekly natural gas inventory information, according to an article published in The Wall Street Journal this morning.

Ed. note: If you enjoy the content you get here at NaturalGasWatch.org, please take a moment to click on one of the advertisements you’ll find on the right side of the page. Your support will help us keep this site up and running. Thanks, Fj.

Investigators at the federal Commodity Futures Trading Commission, which regulates the Wall Street commodities trading, detected “suspicious trading strategies around the reports by the U.S. Energy Information Administration,” the WSJ story reported.

The EIA issues regular weekly reports on the country’s energy inventory, including a report that details the amount of natural gas that is held in storage. The EIA report is viewed as the most accurate gauge of short-term supply and demand.

CFTC investigators believe that commodities traders armed with equipment that lets them execute transactions at extraordinarily high speeds use the capability to create artificial price swings by flooding the market with transactions in the moments before the EIA report is released.

From The Wall Street Journal story:

The CFTC has found that a large proportion of trading volume around the data is being conducted by high-frequency firms, according to people familiar with the matter. One person said that many commercial traders, a category that includes energy producers and consumers, typically avoid trading immediately before and after the data to avoid the swings.

The EIA publishes a report at 10:30 a.m. EST each week, almost always on Thursdays, that provides an update on the amount of natural gas added or removed from U.S. stockpiles. The figure is widely considered the best gauge of gas supply and demand in the U.S., and typically results in the week’s busiest trading window.

Traders have pointed to unusual trading patterns as recently as last week. In the minute before the EIA report was released on Feb. 7, volume in natural-gas futures traded on the New York Mercantile Exchange spiked to 1,954 contracts after trading well below 1,000 contracts for the majority of the morning.

CFTC Chairman Gary Gensler had told the WSJ in March 2012 that the agency would be increasing its scrutiny of high-speed traders and their ability to influence commodities prices.

Tags: , , , , , , , , , , , ,

2 Comments to “Feds Investigate Natural Gas Price-Fixing Allegations”

  1. Kim feil says:

    A Seeking Alpha commenter complained about this when it happened and I posted this to Facebook and would love that more people keep paying attention to how natural gas is being used to make money UNnaturally like the land grabs of Chesapeake in their wreckless McClendon daze…now if the drillers would just drill right for natural gas..1) not by people 2) use all electric engines 3) use NG vehicles 4) figure out how to keep silica dust on the site and out of our lungs 5) flowback into closed, pressurized flowback tanks-not OPEN hatch tanks 6) plug and abandon after the dang thang peters out–no refracking o our precious wager sources 7)fix your methane, global warming leaks!!!!!

  2. Richard Yhip says:

    Sorry I only read your article today May 10,2013 & was very happy to see the CFTC investigating Natural Gas price fixing/manipulation by large investment banks. Unfortunately up to this time I can see no progress made in this investigation as this fraudulent practice has become even worse over the past months as evidenced by the “natural gas future real time charts’. Just yesterday Thursday 9, 2013 after the EIA released their weekly NG report of an injection of 88BCF surplus the price of NG defied all logistics (Surplus,weather etc..) and spiked upward. Traders see the ‘candles’ on that chart as a “portrait” of direct price manipulation for big profit taking & are helpless to fight these Wall Street bullies. Millions of $ have been lost by traders who invest in the market using ‘sound & honest business principles.’ This fraudulent & unfair competition erodes all their confidence & ability to makes smart decisions during trading. We exchange ideas on Investment.com & many feel that these large invetment banks are to blame not the least of which is Goldman-Sachs who has been notorious in the past for screwing their own clients.
    Because of their financial power they feel that they are above the law as proven by their ‘persistent manipulation’ of the market & thumbing their noses at the CFTC as to say “CATCH ME IF YOU CAN!”

    On behalf of all the honest traders I hope this message can be conveyed to Mr. Gary Gensler of the CFTC by encouraging him to persue these criminals with all his tenacity and bring them to a swift justice.
    We would all be in his debt.

Leave a Comment

Blog Directory
Add blog to our directory.
Beyond Fossil Fuels: Alternative Energy
Powered By Ringsurf
The Blog Farm