You go away for a week, you miss all the fun.

The NYMEX started the month of May by doing the one thing no one expected: experiencing a prolonged surge of buying. In the space of four days front month pricing, which had been threatening to scrape the $3 barrier, suddenly shot up to $4.50. It has cooled off a bit since then, settling down in the $4.20-4.30 range, but has found at least temporary support at this level.

Take a quick look at the fundamentals, and you will see that there’s no reason on earth this should have happened. Storage levels are at near-record levels, and it is predicted that they will remain there for the rest of the year, with an all-time high sitting in storage when we hit Winter 2009. There’s plenty of LNG out there looking for buyers, much of which will go into storage just to have somewhere to put it. Rig count is roughly half what it was when natural gas prices were at their peak, but the shutdown in production still has not caught up with the drop in demand. Spring weather is running mild to warm.

We’re afraid fundamentals aren’t going to help you on this one. Something much more simple happened.

Investors decided it was time to get optimistic about the economy, so they did.

And natural gas was where they did it.

This is not the first jump we’ve seen this year; as you may recall, investors overreacted to a bit of good news in the storage report about a month ago. That bump lasted right up to the next storage report, whereupon it promptly dropped like a stone. But that rise was, at least, a reaction to fundamentals. This rise has nothing to do with natural gas supply, and everything to do with speculators growing tired of sitting on zero-interest T bills and looking to get back into the game.

There’s plenty of analysis, and no agreement, on who is doing the buying. Some suspect this is large funds looking to take long-term positions with an eye toward 2010. Some have attributed it to the actions of a single energy fund. Some are attributing it hangovers from bad short positions at the end of April. But everyone’s talking investor psychology, and nobody’s talking natural gas supply and demand. Apparently, when you’re buying commodities, the commodity itself doesn’t always matter.

What this means to you. First off, our apologies. We’ve been trying to help you understand the NYMEX, and how prices move, in terms of the market fundamentals which have traditionally driven natural gas prices. It is becoming increasingly clear that, looking forward, this will have to be balanced more and more with a completely different set of factors. Perhaps we should have spent a bit less time on storage levels and rig counts, and more time checking “Mad Money.”

Which leads to the next question: how rational is the exuberance this time? Is the economy really in recovery? From our standpoint, the signs are good, but the progress is fragile. Job count continues to fall, and until the number of employed Americans begins to rise, it is difficult to speak of a real recovery. Perhaps, instead of looking for the bottom on NYMEX prices, this is the bottom we should be tracking. We’ll keep you posted.

Check the NYMEX

Energy audits have become a hot commodity in recent months, and at Cost Containment Intl., we’re doing everything we can to fan the flames. Our business is saving money, and there’s no better way to save on energy than to stop paying for heat, light, electricity and hot water that don’t help your bottom line. If you haven’t audited your site, that’s happening right now, and you’ve got money that is literally going up in smoke.

Still, some people are hesitant to spend money (never mind that the initial stage of an energy audit is free) when they might not need to. So we’ve created a simple test to determine if you’re one of the people who doesn’t need an energy audit.

If you can correctly answer these simple questions, you can rest assured that your energy dollars are well spent.

1. Your main boiler is currently experiencing 15 cycles an hour, and has an ASE of 65 percent. Is this a good thing or a bad thing?
2. Where have you implemented VFDs? Please show plans for full credit.
3. What tools are used to harvest daylight?
4. How much did you increase efficiency through use of CHP (we’re assuming you know what “CHP” stands for)?
5. How many empty rooms in your building are being lit right now? How many were lit twelve hours ago? For full credit, explain how you accurately monitor your lighting.
6. Are you using a Constant Volume HVAC or a VAV?
7. Give a complete list of the federal, state and local incentives for efficiency upgrades in your area. For extra credit, list the results of your engineered tax segregation study.

If you got all of these correct (and if your answers were correct, you’d know it), congratulations. You don’t need an energy audit.

If you didn’t, you’re losing money right now. You’re losing it today, you lost it yesterday, and you’re going to lose it again tomorrow. Cost Containment Intl. would love to help you do something to stop that.