In Response to “Hedge funds bet on US gas shortage as cold boosts demand”
Written by Michael Vrtis, President of Realgy Energy Services in response to the Fiscal Times article “Hedge funds bet on US gas shortage as cold boosts demand”
Remember the financial crisis (is it over?)? Then this article should strike a familiar note. Hedge funds influencing the commodities market.
Inarguably the cost of natural gas has skyrocketed (some say far in advance of demand). As hedge funds buy NYMEX futures those purchases increase the prices as they create additional demand. This additional demand does nothing more than allow the hedge funds to place a bet on the NYMEX and their bet is then passed along to every user of natural gas. Accordingly, their speculation inflates the price of the NYMEX contract prices and therefore passes along these costs to ALL end-users (we call them customers) whose contract is tied to the NYMEX.
Part of the Dodd-Frank financial reform was to limit the influence of hedge fund speculating in the market.
Realgy cannot influence the NYMEX. However, the use of our proprietary ManagedPriceTM agreement minimizes reliance upon it. The ManagedPriceTM allows our energy buyers to use NYMEX, along with fixed price and INDEX purchases. The result is to minimize the impact of any single natural gas price and allow for consistent pricing that beats the utility costs. The history of the ManagedPriceTM program has shown it’s effective at mitigating short-term price spikes when used in conjunction with our Storage program and PriceWatchTM Service.
Check out the article in Fiscal Times: “Hedge funds bet on US gas shortage as cold boosts demand”
Natural Gas at Five Year High
Natural Gas prices have made a jump above $6.00 Dth or $0.60 / therm in the wholesale market; this is a 30% increase in the last couple days!
This increase looks speculative by traders but if it holds till February 26th it will set a five year high for the NYMEX first-of-month pricing and will keep bills high
The Bloomberg News article “Natural Gas Gains With Coffee as Commodities Jump; S&P 500 Rises” discusses the impact of natural gas and other commodities from the traders perspective.
Natural Gas price increased 27% on February 18, 2014
To keep track of the wholesale prices please enroll with Realgy’s NYMEX reports. It will send you NYMEX end-of-day reports daily.
Realgy is working to ensure our pricing stays as low as possible. Given we are all dealing with the coldest winter in 20 years and the highest energy prices in over 5 years.
