The Wall Street Journal-20080216-Saracen Cites Losses Tied to Natural Gas
Return to: The_Wall_Street_Journal-20080216
Saracen Cites Losses Tied to Natural Gas
Full Text (381 words)Hedge fund Saracen Energy Partners LP has posted undisclosed losses on natural-gas trading and has been forced to liquidate positions, the latest fund to run into difficulties in the volatile market.
"We unwound some unfavorable positions," said a spokeswoman for the Houston-based fund.
She said Saracen still has liquidity and continues to operate in the energy markets, including those for natural gas, coal, refined products and electricity. Natural-gas traders said the fund incurred losses betting on the difference between March 2009 and April 2009 natural-gas contracts.
The Saracen spokeswoman declined to disclose the size of the fund or the size of the losses. Other Saracen executives couldn't be reached for comment.
The Saracen fund had $1.6 billion in assets under management at the end of January, after losing 12% since the beginning of the year, according to a person familiar with the situation. The fund has since dropped 31% year-to-date, as of Thursday, the person said.
Efforts to unwind short natural-gas positions could place upward pressure on the market, said Allen Rather, a private energy analyst in Victoria, Texas. If the fund attempts to buy back previously sold positions amid forecasts of colder weather, the resulting buying pressure could propel front-month natural-gas futures past $9 a million British thermal units, he said.
The market rose dramatically on Thursday, jumping 4.6% to settle at $8.772 a million British thermal units as weather forecasts called for frigid temperatures in the U.S. Midwest and Northeast over the weekend. But Saracen's efforts to cover short positions also could have contributed to the rally, traders said.
According to traders, Saracen bet that the spread between the March and April 2009 contracts would decline, when in fact it widened by 41% in a month.
In other commodity markets:
CRUDE OIL: Crude-oil futures sped past $96 a barrel before ending all but flat, unnerved by gloomy U.S. economic reports and deflated by profit-taking ahead of a long holiday weekend. Light, sweet crude for March delivery closed up four cents, or 0.04%, at $95.50 a barrel on the New York Mercantile Exchange, after earlier rising to $96.67 a barrel.
PLATINUM: Prices on the New York Mercantile Exchange rose again in a continuing reaction to electrical-supply problems in South Africa. April platinum rose $57.80 to settle at $2,063.70 an ounce.
