Sometimes, a little dose of reality can spoil everybody’s fun.

Some parts of the country actually experienced summer weather that felt like summer this week, especially in the southern states, and the extra demand resulted in a tepid, sub-expectation injection this week. In fact, the working gas in storage actually LOST ground to both last year’s figures and the five-year average, something that hasn’t happened in quite a while.

So the ground was set for another burst of irrational exuberance on NYMEX. Then the government went and spoiled everything.

They released job figures for June.

It’s clear that the mood in the country is shifting from outright pessimism to a fragile, impatient optimism, so figures showing that unemployment is still increasing…albeit at a slower rate than before…put a major damper on everything, including NYMEX natural gas. A short end-of-month rise has been gradually losing steam heading into the long weekend ahead.

What’s less clear…and of particular interest to us here at Cost Containment Intl….is whether we have finally hit the long-anticipated support to NYMEX natural gas prices. Despite (or perhaps because of) all the different factors in play, and a fair amount of weekly bouncing, the overall price curve since April is flat. Predictions of sub-$3.00 prices have not happened, and every uptick and decline has proved to be temporary. It’s a bit on the bumpy side, but it’s starting to feel like level ground.

Of course, we haven’t yet seen a week where all the forces line up together and push in the same direction, or a market reaction to such a clear signal. With reality, as with the current NYMEX, even the level path has its ups and downs.

If you are simply interested in checking the NYMEX price, this has been a pretty uneventful week. But if you’re interested in the story behind the price, there have been some interesting developments this week…with a touch of conspiracy theory mixed in for good measure.

On the face of it, this week saw the latest uptick in NYMEX prices gradually fade in the face of market fundamentals which offered absolutely no support.Huge supply. Little demand. Sluggish economy sending mixed signals. Nothing drastic on the weather front. Today’s storage report came in marginally under estimates…the overall storage numbers continue to pad their record-setting pace…and the NYMEX only blinked. The past week has been an easy, gentle slope downward. Situation normal.

Behind the scenes, however, we have been tracking some interesting stories centering around the United States Natural Gas ETF. Unless you have a taste for the esoteric financial instruments that got us into our current economic mess, you’ve probably never heard of them. ETF in this case stands fro exchange-traded fund. These funds are ways for people to play around with commodities (in this case, natural gas) in much the same way that people used to play around with American mortgages. We mentioned them peripherally in a previous post about the NYMEX price jumps we have seen at the end of recent months.

The reasons that UNG is getting so much attention are twofold. First, a lot of big money investors are directing a lot of their big money into UNG. Second, there are indications that UNG is currently responsible for up to one-third of all open NYMEX contracts. That’s right: one third of NYMEX contracts potentially being controlled by one entity with very specific interests that have nothing to do with heating or cooling your building.

Still just a few stories. We’ll see if more follow.

Next week moves us from June to July: let’s see whether or not NYMEX and the fundamentals mesh as a new front month comes up. At Cost Containment, we keep tabs on everything that affects your energy future, so you can bet that we’ll be watching with keen eyes.

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There’s really no other way to say this: nothing much happened this week.

Prices bounced around within a fairly narrow range all week. Today’s weekly storage report came in a few Bcf under expectation, and the price is currently up to around $4.00, but this reaction can be considered knee-jerk at this point. By the beginning of next week, it will drift down, after which it will most likely spend a few days…bouncing around within a fairly narrow range.

All indications continue to point to a gradual downward trend as we head into summer, although the direst precitions have not yet actually materialized. There will, no doubt, continue to be short-term overraction to anything resembling good news (Raymond James stating on Tuesday that the 2009 natural gas market was “hosed” does not fall into this category), but for the moment, discussing the NYMEX natural gas price has taken on all the drama of the San Diego weather report. Today was in the mid-60s and partly cloudy. The rest of the week? Mid-60s and partly cloudy.

It’s likely that investors have turned their attention to where the action is: oil. The oil markets have rebounded nicely (if you happen to be an investor or a producer…less so if you drive a car) in the last few weeks. Anyone who doubts the decoupling of the energy markets should check out the divergence in the past month. Two very different stories.

We are even seeing indications that the reliable link between natural gas and electric rates may be doing a bit of decoupling as well. We have seen some local ratcheting up of electric rates, despite the even path of natural gas. It’s too early to tell if this is a trend or not, but it bears watching. The eventual effect on eletric rates of the proposed Cap and Trade legislation, which is currently mired in congress, will add a new level of complexity to what was once a very predictable relationship.

So there is still plenty to keep the energy markets interesting. We’re keeping our eyes open.

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We’ve got a new favorite reality TV show: waiting for the weekly natural gas storage report to be released at 10:30 on Thursday morning, then heading over to the live NYMEX feed to watch the market’s reaction. Since we check a 15-minute update, we have to wait until 10:45, but the results for the past few months have been consistently entertaining.

Last week, a report that was a whopping 3% below expectation, coupled with a small downward revision of overall reserve levels, resulted in price liftoff at 10:45. This rally held up through Tuesday, then tumbled, which muted the response to today’s higher than expected injection. But down the price goes, nonetheless. It should settle back to around where it was before last week’s rally by end of day.

It’s interesting watching how a country which is increasingly looking at the world through a timeframe based on Twitter and two-minute Youtube videos is dealing with the fact that the economic downturn is not going away just because we’ve all become bored with it. While the signs and the trends are clearly pointing up, we’re not there yet. We are probably not going to be “there” for quite a while.

People continue to face layoffs, housing prices continue to drop, and GM is not the last company that will file for bankruptcy this year. All of these downward trends have slowed considerably, but it’s going to be a while before we replace the dreaded “r”-word (recession) with the eagerly anticipated “r”-word (recovery).

Meanwhile, the impatience in the natural gas commodity market is palpable. They jump, they come to their senses, then they turn around and do it all over againg.

There are plenty of indicators that gas, like the economy, hasn’t quite bottomed out yet. There are plenty of respected voices saying we will see the other side of $3.00 before the year is out. Which means our favorite new guilty pleasure should be continuing to entertain all the way through 2009. Don’t touch that dial!

At Cost Containment Intl., we’re content to watch others jump the gun. Our goal for you is a long term plan designed to secure your long term future. We all know where slow and steady get you. Give us a call.

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This past week wasn’t all that interesting. This coming week will be.

Prices bounced around a bit, but more or less stabilized around $3.50 following last Thursday’s precipitous drop, which came hot on the heels of last Thursday’s storage report. One can feel, however, the pull of a gradual slide towards the $3.00 mark. Considering that the fundamentals of the natural gas market, the outlook for the national economy and the forecast for the global economy haven’t changed all that much from where they were last week, or the week before that, or the month before that, this is entirely predictable.

It may have nothing to do, however, with what happens to natural gas prices this week. Because this week marks the turn from May into June, and funny things have been happening to the NYMEX price when the end of the month comes around. It will be worth watching to see whether this turnover is “funny” or not.

We’ll promise you one thing: nobody knows for sure.

It’s been interesting reading the market analysts these past few months as they try to come to terms with 2008. This past year saw the natural gas market endure greater volatility than ever before in its history, and also saw it follow a path that completely contradicted traditional market predictors: prices rose like a rocket during the summer, then plummeted during the winter.

And while most analysists have stuck to their guns in explaining the market according to traditional market fundamentals, each week brings a new onset of head scratching.

At Cost Containment Intl., we think they actually know the answer. They just don’t like it.

We’ve written many times in the past about the role that speculation is playing in the energy markets. Speculation is a fairly new factor for energy, and it’s a factor that has changed radically in the last few years due to the influx of a new generation of investors and fund managers. They have littler aversion to risk, they’ve enjoyed a taste of quick, easy profits, and they have little patience. They are undeterred by the fact that they’re not schooled in the fundamentals. They don’t mind playing fast and loose, especially when they’re playing with other people’s money.

In other words, they’re completely unpredictable. They tend to rush in and rush out (as we’ve seen over the past couple of months), leaving no more than tantalizing clues as to what started the rush. They amplify small price trends into major bumps. And in the process they have added a level of complexity to predicting the market which no one, as yet, has come to grips with. Most analysts are either leaving them out of the equasition or minimizing their impact.

What this means to you. We’ve said in the past that managing energy costs requires the combined skills of an engineer, an economist, a geologist, a climatologist, and a political scientist. Looking ahead, you’ll have to be a psychologist, as well. While it is doubtful that market factors will converge again into the “perfect storm” that was 2008, it’s not out of the question. Nothing is out of the question right now.

There is one factor, however, that you can predict and even control: your own tolerance to risk. This is a good time to take your own pulse, know your own mind, and set up an energy plan that matches your personality. Because the decisions won’t be getting any easier. We’re here to help.

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