Wednesday, May 2, 2012

Major Adios: "Natural gas Trade Whiz Arnold Shutting Centaurus fund" (Special Bonus: Natural Gas Weather Forecast!)

Between the fine Spring weather and this news, natural gas longs never stood a chance.
The front futures were down 11.8 cents (4.97%) to $2.253.
We had an awful lot of fun with Arnold's patsy, the Amaranth boys, some of the posts are below the jump.
From Reuters:
Legendary natural gas trader John Arnold is closing down his flagship Centaurus fund, a source said on Wednesday, as the former Enron wunderkind struggled to maintain outsized returns with prices near 10-year lows and regulations tightening.

Centaurus, famed for gaining more than 300 percent in 2006 by taking bets opposite to those held by failed rival Amaranth Advisors, will return capital to investors, according to an investor in the fund who said he had received a letter from Arnold earlier on Wednesday.

A person who answered the phone at Centaurus' Houston office said no one was available to comment.
The Centaurus Energy Master Fund is the biggest one that is open to outside investors, the source said. Arnold had a total of about $4 billion assets under management last year, although the source estimated that the Master Fund held around $2 billion.

After the fund suffered its first-ever annual loss in 2010, Arnold, who turned 37 last year, reduced its size because of diminishing market volatility and tough new limits on commodity speculators. He returned $1 billion of capital to investors last summer. The fund gained less than 10 percent in 2011....MORE

HT: Alphaville's The Closer post.

Surprisingly, Bloomberg does not attribute today's decline to a Reuters Exclusive, instead focusing on complex chaotic systems:
Natural Gas Futures Decline on Outlook for Moderate Weather
Reuters came back with the au contraire bit:
While I fumed over part of the content of the Bloomberg piece:
...Cooling demand in the U.S. may be 7 percent below normal from May 8 through May 12, data from Weather Derivatives in Belton, Missouri, show.

Summer Outlook
Temperatures in the U.S. this summer will be lower than the past two years and the number of hurricanes coming out of the Atlantic will probably be fewer than in 2011, forecasters from MDA EarthSat Weather said.

While June to August may be warmer than both the 10-year and 30-year averages, temperatures aren’t forecast to reach the record hot levels of 2011, Travis Hartman, energy weather manager at MDA in Gaithersburg, Maryland, said in a joint presentation by MDA and Bloomberg LP in New York yesterday.... 
Which is like a Roman orgy compared to my coquettish ankle-flash from April 30:
...One of these days we'll give you a weather report for July-September 2012....
Although truth be told we probably gave the milk away for free on April 18th with "Natural Gas: Why You Don't Ask An Economist for the Weather Forecast":
We're looking for a cooler-than-last-year summer meaning lower electricity production for air conditioning.
 La Nina has transitioned to ENSO-neutral (La Nada) and has a 30% chance* of becoming "El Nino Conditions" later this summer....
Anyhoo, here are some of our NatGas favorites from years gone by:

June 2008 
Centaurus, Carlyle Carve Gas Caverns as Traders Bet Prices Rise
John Arnold turned $8 million into $1.5 billion in the past six years by betting on natural-gas prices. Now the former Enron Corp. trader is seeking his next fortune under a Colorado cow pasture....
August 2009 
Former Enron trader calls for setting commodities limits

July 2007 
Amaranth: Hunter Planning Career in Stand Up Comedy

December 2007 
Moore Capital Closes Canadian Unit Following Losses (Amaranth)
Moore Capital Management Inc. fired its Canadian hedge-fund team overseen by former Amaranth Advisors LLC trader Manos Vourkoutiotis and closed the unit after managers lost 15 percent last month....
Attempting the Reverse Amaranth
 Feb 2008
Saracen Attempts the Reverse Amaranth and...Yes!... Sticks the Faceplant Landing!
July 2008 
The man who lost $6 billion (Brian Hunter, Amaranth)
July 2007 
From the report (page 4):

Natural gas traders are well aware of the consequences of this limitation. For example, when Amaranth’s lead energy trader predicted in an email that “boy I bet you see some CFTC inquiries” into a price spike that affected the final price of the September 2006 futures contract, another trader reminded him that most of the trades had taken place on ICE using swaps. The trader wrote: “Until they monitor swaps no big deal.”
Brian Hunter, Natural Gas and Enron

And many many more.