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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I was watching one of those “World’s Most Amazing Videos”-type shows the other day, and saw a video where a bungee jump almost went disastrously wrong, with a television crew there to catch the whole thing. I don’t remember exactly what happened during the jump…there are an awful lot of these videos of extreme stunts going wrong on television these days…but I do remember what the jumper said to the television interviewer after they got safely to the ground.

The interviewer asked whether, in retrospect, the jumper would rather not have risked the jump.

The jumper responded that, even knowing what they now knew, it would still have been worse to go through life never knowing whether they had the courage to actually take the jump.

This story encapsulates everything you need to know about the risks you face as a customer in today’s energy market.

While there are all kinds of hedges available to you…and at Cost Containment Intl., we are strong advocates of hedging whatever energy plan you choose…your energy plan will be based on one of two basic approaches. You can lock in a fixed rate. Or you can ride the market with a variable rate.

The choice is traditionally presented as being fixed=no risk, variable=risk. Looking back at 2008 and the lessons it taught us, we need a new way to look at risk. As the bungee jumper shows us, it’s really a question of what kind of risk bothers you the most.

Fixed rate plans offer predicability. Stay within your contracted usage, and you’ll know exactly what your energy costs will be for the length of your contract.

Variable rate plans offer flexibility. If you’re positioned to control use, you can maximize your savings and minimize your loss by matching highest use to lowest price.

With a fixed rate plan, the risk you run is that you’re going to see prices dip below your fixed rate and regret the flexibility you no longer have. The sure price is not the sure bet.

With a variable rate plan, you run the risk that prices will go high and then keep going higher, and regret the fixed rate you could have locked. The water is often deeper than it looked when you dove in at the shore.

As 2008 has shown us, we are entering a new age of volatility in energy prices, when traditional predictors and traditional patterns are not as reliable as they once were. Which means that you, the consumer, must develop a new understanding of your own tolerance to risk.

It starts with a simple question. Which would bother you more: the risk you took and lost, or the risk you never dared to take? When you know the answer, you will have the foundation for the right energy plan for your future. Cost Containment Intl. is ready to help you find the right answer.

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.

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We interrupt our regularly scheduled discussion of energy efficiency because things got interesting this past week.

This is a weekly newsletter, and life in the NYMEX is measured in 15-minute increments, so we sometimes miss out on the pulse-pounding excitement that happens on the trading floor (indeed, much of the activity in 2008 was better described as pulse-stopping….). This past week was a case in point; in fact, the wrap up to this particular incident is playing out even as we write this.

If you’ve been following the NYMEX numbers and reading our commentary, a casual glance at yesterday’s close, listed below, is bound to provoke a response of “what the hey?….!” We’re up about 15% across the board from last week. This after months of constant drift downward.

Actually, that rise in price happened mostly during the space of a few hours last Thursday….while we were writing last week’s newsletter. After a short burst, prices pretty much stabilized for the week.

What happened?

Check last week’s weekly storage report, and you’ll see there was a withdrawal of 24 Bcf. Expectations in the industry had been for a withdrawal of around 30 Bcf. That 6 Bcf difference (don’t forget, we’re talking 6 Bcf out of 1,650 Bcf in storage, or about .36%) set off the price spike.

If you’re thinking “that’s nuts,” you’ve got a lot of company. Many experts were scratching their heads over it. There was some talk about natural gas prices “correcting” to match rises in oil prices, but that analysis felt a lot like grasping at straws.

However, add in what’s going on right now (see next paragraph), and we believe that there’s a clear lesson to be learned here.

Check out this week’s storage numbers, which were released at 10:30 EST this morning. Natural gas is back to being injected INTO storage. Care to guess how the NYMEX is reacting?

If you guessed that prices dropped right back under $4.00, then you’ve been paying attention. NYMEX may rally a bit before the day is done, but there was a precipitous drop (it looked a bit like the price fell off a cliff) immediately after the release of the report.

What this means to you. Have you ever watched the finals of the 100-meter dash at the Olympics? These elite athletes get over-excited and over-amped and “jump the gun” on the start.

You remember all those speculators who helped drive natural gas prices up into double figures last Summer? The ones who fled the market as prices dropped? They’re still out there. They’re still looking for quick and easy short-term profits. They consider themselves the elites of their field.

As the AIG situation showed us, the people who helped engineer our current financial troubles haven’t learned anything. They’re just waiting for the sign that it’s time to do exactly what they were doing before.

Last week, a bunch of these over-excited, over-amped investors jumped the gun. Just couldn’t risk being the second investor in when the market bottoms. They hung for a week, looked at this week’s report, and went “oops.”

Are you bottom watching? Are you looking for that “sure sign” that the market has hit bottom before you think about securing your next energy contract? If so, you’ve got a lot of company. And the company you’re keeping is much, much quicker than you are.

At Cost Containment Intl., we’re proud of how quickly we can expedite the bidding process, but compared to the 15-minute time span of the NYMEX, energy contracts move at a glacial pace. The bottom is not when you want to be making your move, because that price is going to be long gone before you’ve even seen your first offer. There are a lot of people out there ready and waiting to bid prices up again, and they’re getting pretty hair-trigger about it. You’ll still be sitting in the blocks while the other guys are halfway down the track.

Meanwhile, if you can get your head around a timeframe longer than 15 minutes….say, three years or more…it’s time to talk long-term energy strategy. Electric and natural gas providers are loosening up for contracts beyond 24 months. We’re not just talking your current contracts. We’re talking your next contract. Cost Containment Intl. is finding good opportunities beyond 2010, and you want to be in on them. Security is a nice place to be right now.

Trust us: this is one race that’s a lot more fun when you’re watching it from the stands.

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