Natural gas prices in the United States have surged nearly 50 percent in the past two weeks despite an apparent lack of events that normally create such spikes, like tight supplies or forecasts ofunusually cold weather.
The frenzied climb in prices has led to calls for investigations by politicians and executives of gas-dependent industries into whether traders have manipulated the market. Companies in the chemical, fertilizer and ammonia industries, where natural gas is an essential ingredient, have been among the most vocal in their complaints about gas prices, which have soared to their highest levels since February.
We’re extremely alarmed by the events of the last several days, said Peter Huntsman, the chief executive of the Huntsman companies, a large manufacturer of chemical products. If what is happening with natural gas would happen with crude oil, we’d have declared war on OPEC by now.
High natural gas prices, if they are sustained, could cascade through the economy and result in higher heating and electricity costs for consumers because gas is used by many power plants as the main fuel, analysts said. Natural gas, which has remained relatively expensive over the past year, rose 9 percent in the futures markets on Friday, to $7.22 per million British thermal units, compared with $4.93 at the end of November
Several traders and analysts suggested that trading strategies at large hedge funds and other financial firms were behind much of the move. Some funds were thought to have made large bets in the futures markets at the beginning of this month that the price would fall.
Pressure by funds that made opposite bets and a scarcity of other traders in the market could have subsequently caused prices to climb.
There’s a great deal of speculative froth at the moment, said Kyle Cooper, an energy futures analyst with Citigroup in Houston.
Responding to calls for greater scrutiny of natural gas markets, Senator Orrin Hatch, Republican of Utah and chairman of the Senate Judiciary Committee, said Friday that he would hold hearings next month.
Natural gas is so critical to U.S. consumers and the economy that if someone has been manipulating this market, they should go to jail, Hatch said.
Several large energy companies, including Duke Energy and Dynegy, have recently paid millions of dollars in fines to settle federal charges that they tried to improperly manipulate prices of natural gas contracts. Cooper, like many others close to the natural gas market, said there were few fundamental reasons for prices to have climbed so high in such a short period.
Natural gas inventories in the United States, for instance, stand at nearly 3 trillion cubic feet, or 90 billion cubic meters, 7 percent higher than at this time last year. And natural gas stocks are about 3 percent higher than their five-year average, the Energy Information Administration said last week.
