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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: Ed Ajootian who wrote (75798)12/1/2006 2:30:05 AM
From: energyplay  Read Replies (2) of 206138
 
I think another factor in natural gas prices was the extensive participation by hedge funds on the long side from the summer onward.

Some hedge funds (Amaranth, obviously) paid big prices to long NG contracts for September, October and November. Their counterparty, probably an investment bank or other hedge fund, was short those contracts.

After prices dropped, the counterparty would make a lot of money closing the trade, and so they were willing to pay a higher than normal price to buy NG futures and close the trade.

I think this may have artificially held up NG prices the past few months. Money the hedge funds lost (Billions) has held the market price up during the shoulder season with full storage. Maybe not as big a factor as the Hurricanes of 2005, but still a factor.

I don't think will will get this same effect next year.
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