NYMEX is off the fence. And the sounds emanating from the natural gas futures market indicate that the the style of the moment is a profound funk.

Despite another strong draw from the storage report, another winter storm preparing to lambaste the East Coast, and a flip to a new front month, NYMEX has been falling steadily since last week and shows no sign of stopping just yet. Prices crossed the $5.00 mark yesterday, and look set to settle somewhere around $4.75 by end of day. It snowed plenty in our neighborhood yesterday, but the thaw has clearly set in over at NYMEX.

For the record, Business Week says natural gas has been the worst futures market for the new year. Orange juice and nickel have performed the best, if you’re keeping score.

None of this should be surprising. It has been clear for weeks that while this winter has been a beast, it wasn’t going to be enough to deplete storage, which looks set to end the season at about average levels. And every economic sign points to a stagnant 2010, as businesses lick their wounds, carry on at current levels and wait for the job market to pick back up. That won’t happen fast.

Meanwhile, we’re seeing reason to doubt whether any of the big issues potentially affecting natural gas prices and price volatility will be decided in the coming year. New roles for natural gas in the national energy picture? You may have missed the news item saying that Yvo de Boer had announced his retirement. He’s been the head of the UN’s climate change commission for the last four years, and his retirement is seen as a very bad sign for any kind of international agreement…which, in turn, is a VERY bad sign for any kind of agreement in America. Without a big push for cleaner energy, the odds are good that electricity will be produced in 2010 very much as it was in 2009.

That being said, cleaner, natural-gas burning electrical generators could be coming to your neighborhood…you business, in fact…sooner than you think. The other story of interest this week was the unveiling of the Bloom Box, the first commercially viable fuel cell. This new technology, which converts fuel into electricity electrochemically rather than through physical motion, and which generates electricity at about half the carbon footprint of tradition fossil-fuel generation, will allow individual companies to meet virtually all their demand on-site, and could potentially open up a whole new market for natural gas. Early yet, but bears watching.

So while 2010 may not prove to be a monumental year for natural gas, it will certainly have its interesting moments. We’ll keep you posted.

Today’s storage report was no surprise to anyone who’s spent the past couple of weeks on the East Coast: a huge 190 Bcf withdrawal. It was no surprise to the pundits, either, as this was pretty much bang on to predictions.

The report, buttressed by predictions for a miserable end of the month weather-wise, did little to cheer NYMEX, which was far more concerned about economic reports painting a picture of an American economy that won’t begin full recovery for another two years. And there’s the fact that February, no matter how miserable its last weeks are, is almost over, and America has made it through the winter with its substantial storage reserve largely intact.

NYMEX had been sitting tight all week, which made this the second straight week of virtual inertia. Check the NYMEX numbers against a week ago; we can’t remember the last time two price graphs looked so similar. But today’s economic news was enough to trigger a bit of a slide. We’ll see if this is just a temporary funk or if NYMEX has finally decided which direction it’s heading.

Meanwhile, the week’s news was filled with talk of energy…involving an unexpected energy source. Nuclear is suddenly all the rage. First, President Obama (who has less trouble pronouncing the word than his predecessor) announced his support, backed by loan guarantees, for the first new reactors built in this country in almost thirty years. Then Senator Lindsay Graham released a draft of a new energy bill with a heavy reliance in new nuclear generation. And to top off the week, Bill Gates gave a major speech in support of a new form of nuclear power generation that uses spent uranium and promises almost unlimited generation.

Heady days for an energy source that seemed to be written off the books. And an interesting new wrinkle in America’s energy picture. Because despite nuclear’s spotty record for both safety and economic viability, and despite producing waste products that can take 100,000 years to become non-toxic, nuclear does offer an energy source with high generation rates and zero CO2. There is a small but vocal core of support for the industry within the federal government. And President Obama’s move, which caught many of his supporters completely by surprise, suggests that cap and trade may be stalled for good, and the administration may be seeking new approaches to reduce greenhouse gases. Or, rather, old ones.

A national swing back towards nuclear seems unlikely, but people would have said the same thing about a national recession a few years ago. We are living in unlikely times. And countries like France have made extensive use of nuclear with, thus far, no negative consequences. It’s a bit early to be sensing profound change in the energy picture, but one thing is certain: as the year progresses, it’s not getting any clearer.

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The EIA has pushed back the release of the weekly storage report until tomorrow, so there are no numbers to report on or reaction to gauge today. Right in line with a week where very little happened on NYMEX. After weeks of bouncing around, NYMEX has settled in around $5.30. It could be that after weeks of chasing trends that weren’t there and reading signs that didn’t actually point anywhere, NYMEX has finally settled down until something actually happens.

Or, this could just be a temporary lull before the bouncing around resumes.

A week this uneventful leads to thoughts of inertia. And looking at the current political landscape in America, and the role that legislation is going to play in the role of natural gas in America’s energy future, and the effect it will have on the future of natural gas prices, we’re left to consider the possibility that the current uncertainty in the market may last for a long time. The federal government is closing rapidly on standstill status. With the Democrats losing their super-majority in the Senate, and the party clearly showing no stomach for trying to push through legislation without it, it’s conceivable that 2010 will go down in history as a year where not much happens.

Which means NYMEX may still be looking for reliable signs a year from now.

The EIA, which is the information branch of the Department of Energy, released its energy outlook for 2010-2011 this week. Among the predictions: an average 2010 spot price of $5.37, with 2011 rising to $5.86. If you’re thinking this points to the wisdom of looking for some long-term agreements now, we wouldn’t say you’re wrong.

There’s also an interesting bit of trivia: the January 8 and 15 withdrawals from storage added up to 511 Bcf, the largest two-week draw in history. That was 317 Bcf above the average for those two weeks. It did feel nice to stay warm, didn’t it?

But looking deeper into the EIA report reveals some interesting details. For example, while natural gas use for electric generation has been high throughout the winter, EIA predicts that coal will return to prominence as the source for electric generation as the year progresses. Unspoken in this is the rationale behind it: the coal lobby is well-entrenched in Washington, while the natural gas lobby is not well established. The chances of any meaningful push for natural gas as a cleaner alternative of choice are looking pretty slim. The carbon reduction legislation that looked promising last Summer has quietly disappeared from the discussion.

EIA projects natural gas use will increase .4% this year, and .4% in 2011, but they’re ascribing all of this to increased industrial use as the economy rebounds. Admittedly, as a government agency, they’re not going to include anything in their report that suggests they support a particular agenda, but the fact that there’s almost no mention of potential new demand for natural gas…there is a generic reference to “unforeseen consumption increases”…speaks volumes. Also noteworthy is the fact that the EIA foresees very little change in the volatility of the market for the immediate future.

On the bright side, the price stability that would come from natural gas as part of a national energy policy would certainly make for less interesting posts!

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After weeks of acting like it didn’t have a clue, NYMEX made its peace with the fact this week, and pretty much sat on its hands. After a quick rise back up from last week’s brief flirtation with sub-$5.00 pricing, NYMEX came back up to the $5.50 range and pretty much sat tight. A storage report of a 115 Bcf withdrawal, slightly below predictions, hasn’t made much of an impact.

Most analysts look at pricing trends in terms of “resistance” and “support:” the price level the market refuses to go above, and the price level it refuses to go below. They base their recommendations on these levels, using one or the other depending on whether they’re recommending a long or short position.

Right now, the middle seems a more reasonable place to look. And for 2010 so far, that appears to be around the $5.50 level. The market has been bouncing around a good bit, but this has been a pretty reliable center for the swings. A lot of people picked this price as the bellwether for this year. So far, so good. We’re wondering how the bellwether will hold up when the weather changes. This has been, thus far, the coldest winter in recent history (by the way, for those of you who wonder about this, extreme changes in temperature patterns…whether hotter or colder…fits with the global climate change model. The last couple of winters have shown a lot of unusual patterns. Make of it what you will.) But the end is in sight. Storage numbers are heading back above the benchmarks. The economy sends different signals on a weekly basis. Support? Resistance? Maybe even stability?

On the local front, Cost Containment International became an associate member of the Central Florida Hotel and Lodging Association. We’re also members of the Association of School Business Officials, CAI here in Illinois, and the Chicago Apartment Association. We’re constantly looking to build stronger ties with and deeper understanding of the industries we serve. If there are associations which would help us better understand your business, let us know.

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