Amaranth’s $6B Gas Bet Gone Wrong (2006) - QuickFinanceStories

Not longer than 3 minutes. Amaranth Natural Gas Blowup 2006 In 2006, a hedge fund named Amaranth Advisors lost about $6 billion in a week betting on natural gas spreads. It was a reminder that commodity curves can humble even confident traders.

The star was Brian Hunter, a trader who believed the winter strip would rise and the shoulder months would fall. He levered up in NYMEX and ICE gas futures, doubling down as prices moved. For months, the bet worked.

Warm weather and hurricane fears kept volatility high. Investors enjoyed strong returns and asked few questions about concentration. By late summer, the weather looked mild and gas supply looked adequate.

Investors enjoyed strong returns and asked few questions about concentration.

Spreads narrowed sharply in September. Margin calls followed quickly. Amaranth tried to unwind quietly but the positions were so big that the market noticed.

JP Morgan and Citadel stepped in to take over chunks at distressed prices. Within days, the fund’s flagship strategy imploded. Investors were left with heavy losses and regulators reviewed position limits and clearing exposures between exchanges.

Brian Hunter faced CFTC and FERC actions. Amaranth shut down, and the episode became a case study in why size, leverage, and seasonal bets can combine into a combustion event. The blowup showed that energy markets, like their fuel, can burn fast when a crowded trade meets an unexpected forecast.