NYMEX is not a happy place at the moment. Today’s weekly storage report came through above expectations, and a sustained rally that had pushed prices over $4.00 is evaporating by the minute. Seems that a week of nothing but good economic news…solidly good economic news at that…isn’t enough to overcome the current hair-trigger response to the storage report. Prices currently look set for a 10% drop by end of day.

And there is a new wrinkle to storage: the question of capacity. NYMEX appears to be keying in on the storage numbers as the one dependable sign that natural gas production has finally dropped enough to meet the low demand. But there are indications that the storage infrastructure is simply nearing capacity, and the low numbers are a reflection not so much of limited supply as of limited space left to put it.

If you’re looking for sure things in natural gas right now, you’re looking in the wrong place.

Which brings us to the week’s most interesting development. With fundamentals and market forces holding steady for the past few months, we have been watching the one piece of the overall price puzzle where there has been movement: speculation. The Commodities Futures Trading Commission (CFTC) is continuing to hold hearings on the role of speculation in commodities markets, and every indication points to new restrictions being put in place.

You’ll never guess who gave testimony in favor of this. John Arnold, a former Enron trader.

What makes this even more unexpected is that Mr. Arnold is currently a manager at a hedge fund that trades in energy commodities. And he’s not the only hedge fund manager saying this. Admittedly, he’s parsing his words…recommending restrictions on forms of trading that are not his firm’s bread and butter…but a year ago, the notion of anyone within the financial sector speaking publicly in favor of restriction and regulation would have been laughed out of the room. We are living in interesting times.

Chances are he’s just trying to get a good word in ahead of the curve. There are strong indications that the CFTC is going to release a report soon that will reverse it’s previous position and conclude that speculation DID play a role in last year’s price spike. Better late than never. That would set the stage for tightening regulations moving ahead. But the current administration has thus far done a better job of setting goals than meeting them, so we’ll see. As we’ve said, nothing is certain in the energy markets.

And yes, energy Exchange Traded Funds (ETFs) are still at the center of the discussion. For us at Cost Containment Intl., this is an interesting example of how the same idea can be used to different ends. We work the same way as ETFs: aggregating thousands of individuals into a single group, then using the power of the group to benefit each member. But we aim for very different results. At Cost Containment Intl., we use the power of our aggregated customers to lower prices on thousands of contracts individually negotiated in a free market. There are no losers here. The ETFs appear to be using the combined assets of their members in a single play, to gain control of one part of the energy futures market. When one group calls the shots, the market isn’t free any more. A win for them, but a loss for everyone else. Which is making them some unexpected enemies.

When people start saying things you never thought you’d hear, it’s time to keep your eyes, and your ears, open.