Washington (Platts)--16Aug2007

The global credit crunch centered on subprime mortgage lending is
spilling over into US gas markets as speculative funds liquidate positions in
the financial commodity markets, sources said Thursday.

     Peter Beutel, president of risk management group Cameron Hanover, said
the move to cash began three weeks ago when funds, which had held record short
positions, began to lighten their NYMEX positions. 

     "There were 1.8 large speculative shorts for each long," he said. "So
basically if hedge funds are trying to get cash in natural gas positions, they
would have to cover them rather than sell them."

     While many market analysts attributed the shift to nervousness over the
record heat and potential hurricane threats, Beutel said he believes it was
the beginning of the shift into cash by the funds.

     On Thursday, the shift continued. "Today, we're just not escaping the
capital-market contagion," said Man Financial broker John Kilduff. "The market
is rife with rumors about liquidation issues and companies having some
problems." 

     "Crude oil seems to be affected more than other markets at this point,"
he added, saying crude oil was viewed as an asset class like gold, silver or
bonds. 

     Although the speculative funds may or may not have exposure to the
subprime mortgage lending crisis, Beutel said the crisis is making everybody
nervous.

     "There could very well be one or two hedge funds [in the market] that
need to raise cash, but I don't know enough about individual funds to know
[who]. It's somewhere between need and desire, but it appears to be going on,"
he said.

     Earlier in the week, Commercial Brokerage commodity advisor Ed Kennedy
said that there was some panic buying from funds on the short side.

		--Cheryl Buchta, cheryl_buchta@platts.com