From the Financial Times

Goldman Sachs has quietly overtaken Chevron and ExxonMobil to become one of the biggest natural gas merchants in North America, expanding in physical commodities trading even as other banks pull back.

The Wall Street institution last year bought and sold 1.2tn cubic feet of physical gas in the US — equal to a quarter of the country’s residential consumption and more than twice its volumes in 2013, a recent regulatory filing revealed. Goldman is now the seventh-largest gas marketer in North America, according to Natural Gas Intelligence.

The gas utility serving households in Buffalo, New York last year purchased 11 per cent of its supply from Goldman, a securities filing showed. Power plants that produce electricity for copper mines in northern Mexico also buy gas from the bank, according to government reports and industry executives. Goldman’s commodities division, known as J Aron, is listed as a shipper on huge pipelines including the Texas Eastern, which last month ruptured into a fireball that critically injured a man.

Goldman has grown the business even as banks await fresh rules on handling physical commodities such as oil, gas and aluminium. The Federal Reserve has said lethal gas explosions illustrate the risks banks face.

Dealing in physical commodities is exempt from the Volcker rule ban on banks’ proprietary trading passed after the financial crisis. In a letter to the Fed in 2014, Goldman said the physical market, not financially settled derivatives, was the main way gas was traded at certain locations.

While the bank has sold off infrastructure such as power plants and metals warehouses, its rise as a gas middleman highlights a commitment to commodities. Prominent Goldman leaders including Lloyd Blankfein, chief executive, are J Aron alumni.

“The fact that J Aron’s business is growing in the face of low volatility in physical natural gas markets is noteworthy. Many players have downsized,” said Tom Russo, an energy consultant and former official at the Federal Energy Regulatory Commission. Goldman declined to comment.

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