Sunday, 28 December 2014
Last updated 3 days ago
Jun 17 2010 | 11:29am ET
The state of the natural gas futures market is bringing back some bad memories.
The benchmark March-April 2011 spread has surged about 75%, despite the fact that U.S. inventories of the fuel are at one of their highest-ever levels. And that hasn’t been seen since a little hedge fund called Amaranth Advisors collapsed after its huge bet on the March-April 2007 spread went bad.
“This is peculiar behavior given that supplies are currently building at a comfortable pace,” consultant Stephen Schork wrote yesterday, according to Bloomberg News. “We haven’t seen these particular spreads behave in such a manner since a prominent natural-gas trader morphed a $9 billion hedge fund, Amaranth, into a $3 billion fund in August 2006.”
At least one market rumor—reported by Dealbreaker.com—has prominent trader, Brian Hunter, on the hook for this volatility in the natural gas futures market. Hunter was responsible for the natural gas trades that cost Greenwich, Conn.-based Amaranth more than $6 billion and forced the firm to close its doors.
It is unclear what caused the rally, so it is possible that Hunter—or some other hedge fund with a large, bad bet on the March-April spread—could be the culprit. If the spread falls back, “then the fundamentals haven’t changed and we had a lot of people making a bet and it was a wrong bet,” Schork wrote.
Or, the BP oil spill in the Gulf of Mexico could be driving investor fears. “As this trade continues to decouple, then Deepwater Horizon is indeed a paradigm shift,” as traders anticipate an offshore drilling moratorium in the U.S., according to to Schork.
Dec 1 2014 | 10:21am ET
As 2014 winds down, Northern Trust Hedge Fund Services executives took some time to share their outlook on trends facing the industry in 2015. Read more…
Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.