High oil, natural gas prices investigated

The Commodities Futures Trading Commission and the New York Mercantile Exchange said Friday they have stepped up their surveillance of natural gas trading in the past week and industry sources said traders' telephone records have been subpoenaed as part of that effort.\nCFTC officials visited the trading pit this week, an employee of one New York-based trading firm that was subpoenaed said Friday.\n"They didn't give any specific indication that they're targeting a specific trade, a specific trader or a specific (trading) house," said the employee, speaking on condition of anonymity.\nR. David Gary, a spokesman for the CFTC in Washington, said the agency has increased surveillance because of recent volatility and high prices of natural gas trading activity on Nymex since the start of the month. But, as a matter of policy, he said the agency would neither confirm nor deny the existence of any formal investigation.\nNymex spokeswoman Nachamah Jacobovits said the focus of the scrutiny is to "make sure that futures prices are reflective of what's happening on cash markets and that there's no manipulation."\nUtah Sen. Orrin Hatch, chairman of the U.S. Senate Judiciary Committee, said last month that he would hold hearings to determine if the recent increases in natural gas prices were caused by market manipulation.\nOil and natural gas prices climbed to their highest levels in more than nine months Friday as traders responded to colder weather in the Northeast, tight supplies and rising demand.\nThe weak dollar also was pushing energy prices higher, analysts said.\n"It gives OPEC countries less buying power and literally no incentive to make any increases in output," of crude, which is denominated in dollars, said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.\nCrude oil for February delivery closed up 33 cents to $34.31 on the New York Mercantile Exchange -- the first time the front-month contract has closed above $34 since March 17, just a few days before the invasion of Iraq.\n"The weather made people realize just how tight supplies are," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.\nThe nation's commercially available inventory of crude is 3 percent below last year's levels. For the week ending Jan. 2, commercial supplies stood at 269.0 million barrels, down from 277.5 million barrels a year earlier.\nCommercial inventories of natural gas, meanwhile, stood at 2.6 trillion cubic feet for the week ending Jan. 2, or 8 percent above the five-year average for this time of year.\nFlynn said the five-year average was a misleading metric, since demand for natural gas has been rising.\nBut Bentz said supplies of natural gas are adequate.\nIndeed, many analysts said they were surprised when prices first began to rise quickly in late November, and that they remain hard-pressed to substantiate these levels.\nNatural gas for February delivery rose 19.3 cents to $7.287 per 1,000 cubic feet on Friday.\n"I personally don't believe we should be up at these levels," Bentz said, noting that traders have ignored recent fuel-inventory reports that were bearish and focused instead on bullish factors such as the cold weather and the weak dollar.\n"When it's cold, the market does tend to have an upward bias," he said.\nBecause some users of natural gas can switch to fuels derived from oil when prices are high, price trends for one can affect the other.\nIn other Nymex trading, heating oil futures finished up 2.55 cents at $1.01 per gallon and unleaded gasoline closed at $1.02 per gallon, up 2.69 cents.\nIn London, Brent crude from the North Sea rose 29 cents to $31.37 per barrel.