April 16 (Bloomberg) -- The “dramatic swing” in U.S. natural-gas prices last year may have been because of trading in futures and derivatives and can’t be explained by supply and demand alone, Federal Energy Regulatory Commission staff said.

Natural-gas prices at Henry Hub, the delivery point for New York gas futures, almost doubled to a record $13.31 per million British thermal units on July 3 from the start of 2008. Prices fell to $5.71 by year-end, and futures contracts were trading at $3.626 at 10:53 a.m. today on the New York Mercantile Exchange.

“Financial fundamentals along with the modest tightening in the supply-and-demand balance for gas during the first part of 2008 explains natural gas prices during the year,” Arnie Quinn, the director of FERC’s Office of Enforcement, said at a meeting today in Washington. Last year’s global financial crisis “seems to have spilled over into energy markets,” Quinn said.

There were no major supply-and-demand disruptions in the first half, and the balance wasn’t “significantly more bullish” than the five-year average, except in January, Quinn said. Plus, there wasn’t “exceptional surplus” in gas supplies when the drop began after the July peak, he said.

Trading of financial energy products, including gas futures contracts, fell during the second half of the year, Quinn said.

Quinn also told the commission that a slowdown in gas drilling may lead to “much higher prices” when demand recovers, and current gas prices don’t reach the “break-even” level companies need for unconventional gas supplies.

To contact the reporter on this story: Tina Seeley in Washington at tseeley@bloomberg.net.

Last Updated: April 16, 2009 12:17 EDT