Ex-Noble Gas Trader Doubles Credit Line as Market Whipsaws

(Bloomberg) -- The commodities firm led by ex-Noble Group trader Ben Sutton more than doubled its credit facility as it braces for massive natural gas price swings this winter after expanding its trading in the fuel.

Six One Commodities LLC closed a $540 million one-year revolving borrowing base credit line on Tuesday, up from $225 million previously, according to the firm and ING Capital LLC, one of the banks leading the financing. The facility will be used to fund gas-trading operations after a pair of recent pipeline and storage acquisitions, but it includes an extra $90 million because it was oversubscribed. 

That money will come in handy to help meet collateral and credit needs if gas prices extend their recent rally, said Sutton, whose firm is backed by Pinnacle Asset Management LP. “The price sensitivity to the weather over the next few months is going to be extreme,” he said in a telephone interview. 

Energy shortages ripping through Europe and Asia have led to extreme spikes in global gas and power prices, underscoring the challenge of maintaining reliable supplies in the push toward zero-carbon energy. In the U.S., gas prices have also soared on concern that stockpiles will struggle to meet demand this winter as exports to overseas buyers surge. 

Mild weather could send gas at the Henry Hub in Louisiana, the U.S. benchmark, plunging toward $2.50 per million British thermal units while frigid conditions could cause prices to double from current levels near $6, Sutton said. The biggest surges are poised to be in regional markets like New England, which may have to compete with Europe for supplies, he added.

Commodity-trading clients are stress testing their balances on the potential for Henry Hub Climbing to $10 or $12, said Matthew Rosetti, head of North America trade and commodity finance at ING Rosetti. "When we get to regional prices, all bets are off on how high they can spike,” he said. “So predicting those numbers is almost a waste of time.”

Traders are shoring up their liquidity in anticipation of margin calls and higher collateral requirements that’ll inevitably come with rising prices and increased volatility, Rosetti said. The expansion of Six One’s credit facility was led by ING, Wells Fargo Bank NA and MUFG Bank Ltd with participation from HSBC Bank USA NA, Societe Generale and Cooperative Rabobank UA.

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