So much for THAT rally.

A robust storage report has sent NYMEX tumbling, as we write, to sub-$4.00 prices. Following last week’s relatively anemic injection, NYMEX spent most of the week rising towards $4.50. It was, as they say, fun while it lasted. But the legs didn’t hold.

As a result, we have further evidence that $4.00 is the current support price for NYMEX. Prices dropped like a rock within moments of the report release, but once they hit $4.00 they tapered off, and have been bobbing steadily around the dollar mark ever since.

So we’re pretty much back to where we were a few weeks ago. The new EIA reports on production levels, which is anticipated by the end of the month, should make next week interesting. Once again, we’ll see if any rally that results from the likely lower figures keeps its legs beyond a week or two. It seems likely that prices will test different levels…a rise here, a drop there…based on positive or negative news. Then they will settle gradually…or precipitously…back to support levels as soon as contradictory information is released.

In many ways, NYMEX is closer to being a real free market, and to acting like a real free market, than ever before. Which means that it’s operating in fits and starts. People are taking risks, testing the waters, looking for an edge, then scampering back to safety when their predictions don’t hold up.

For perhaps the first time in its history, none of the players know what’s going on. No one knows when or if the economy is going to get back on solid footing. No one knows how much natural gas is actually in production. No one is sure how they should be positioning themselves, so no one is in position to game the system. No one is sure which of the signs to read…we should point out that today’s storage report came on the heels of the first reduction in rig count in several months.

You remember rig count? It used to be one of the most reliable predictors for price movement in natural gas. This rally was largely fueled by a report that rig count dropped by 17 last week. Then the weekly storage report came in well above expectations, and well above average. So much for that reliable predictor. No one’s even got a reliable hunch.

Which is exactly the situation you need to have a truly free market. It should keep things interesting.

Meanwhile this week, there were two ocean-borne developments that can be seen as portents of America’s energy future. In the Gulf of Mexico, “drill, baby, drill” turned into “burn, baby, burn” at the site of the Deepwater Horizon rig, which exploded into flames and sank last week, leaving the wellhead spouting oil like a leaky faucet. The Coast Guard is considering setting fire to the slick in a last-ditch effort to keep it from reaching wetlands and beaches at the mouth of the Mississippi. The fact that this happened within weeks of the Obama administration proposing to open more of the Atlantic seaboard to oil exploration did not go unnoticed.

The Obama administration also signed off this week on the first major American oceanic wind farm, to be located off the coast of Cape Cod. This will be 130 turbines, 400 feet tall, located a few miles south of Nantucket and eventually providing up to 3/4 of the electricity used by the entire Cape. There’s quite a battle brewing, with everyone from environmentalists to Native American groups opposing the development and warning about potential impact.

Old-school consequences of our energy policy share newspaper column space with cutting-edge consequences of our energy policy. The future really is closer than you think.

Here we go again.

The weekly storage report came in at 73 Bcf today. That’s a substantial injection this early in the year: the five-year average is less than half that amount. But in today’s case it was about 10% below projections. So NYMEX is having a bit of a rebound.

In other words, a bunch of bottom feeders decided this was the sign to jump, and feed they did.

We’ve been talking about “support” for the last few weeks…looking for the price where NYMEX will stop falling and hold steady. The last few weeks, while they’ve been “bouncy,” have seen prices hang consistently around the $4.00 range. It’s beginning to feel a lot like support has been reached, although next week’s release of the revised EIA production report may blow it all out of the water.

These days, every time we hit a period of support, attention focuses like a laser on the weekly report. And virtually every report that has fallen below projection has triggered these short, pronounced price bumps.

These are the “bottom chasers” jumping in quick before prices start rising again. They are the people trying to time the market just right to get in at the last second for the absolute lowest price. Hair-trigger responses to fairly inconsequential market signs are their trademark.

As we’ve said before, it’s a terrible way to manage your energy expenses. And a great way to lose sleep.

Because you never know if the bottom is going to hold. So you obsess about it right up to the moment you buy. Then you obsess about it every time the market threatens to go even lower. Plus, by jumping in at the exact same time as a whole school of fellow feeders, you push prices up right at the time you’re buying.

At Cost Containment International, we always look for the right time to buy. But we know that the best savings come from a comprehensive outlook that takes into account patterns in usage, hard bargaining and well planned hedges. Waiting for the “magic sign” that indicates the “right moment” is not part of the plan.

The new year…although, seeing as we’re almost four months into it, perhaps we shouldn’t be calling it the new year any more…is not shaping up to be a year of momentous decisions, as we previously speculated. It’s feeling much more like a holding pattern. We’ve seen most of the traditional price predictors lose some of their relevance over the past few years, and the new predictors have yet to prove their worth. Most of the analysis being passed these days is coming from people with very clear agendas, and should be treated with healthy skepticism.

In other words, we don’t pretend to know what prices are going to do. Four dollars may hold. A market where demand is low and production high may drive prices lower. Revised figures and an accelerated recovery may drive them up.

You can chase the bottom. Rub your rabbit’s foot for luck and try and get a good night’s sleep. But we’ve got a better way to save.

Wonder if there’s a bookie in Vegas who is willing to take a bet on whether we top out storage this year? America came within a few Bcf last year…and 2010 is now officially in the lead.

NYMEX has been bouncing around all week based on the economic data coming out. It appears that, for the moment, $4.00 is proving to be the support price, though it’s a fairly bouncy support. The pattern is very similar to what we were seeing last Fall: enthusiastic response to positive reports, generally lasting right up to the next, less positive report.

NYMEX had been riding a two-day high when today’s storage report, coupled with an unexpectedly bad jobs report, knocked the wind out of its sails and prices back below $4.00. The injection of 87 Bcf was well above expectations, and put current storage levels comfortably above last year (and well above the 5-year average) for the first time in more than a month. The revised EIA figures expected at the end of the month, which should show considerably less supply than was previously estimated, should put at least a temporary damper on things, but beyond that, there’s nothing to stop people from socking gas away.

A quick glance at the NYMEX futures through the rest of the year tells you why. Earlier in the year, forward prices all the way to November were pretty much flat. That means there’s no reason to buy now, since there’s no profit to be made by selling later. But the past few weeks have brought a bit of an upward slope back to prices through 2010. Not a huge rise, but a steady one. The more you see that slope, the more reason people have to buy now. The more they buy, the more storage grows. The more storage grows, the more pressure there is for prices to stay low.

The more prices stay low through the next few months, the more reason people have to store in anticipation of Winter sales. Let’s not forget, last Winter saw a protracted rally in prices that appears to have been based on nothing other than seasonality. And after that comes 2011, which is when most analysts believe the real economic recovery will begin.

Could we break the system in 2010? No one’s talking about it yet. But even with revised figures, there’s clearly ample supply. The economy is still only teasing at recovery. Things could get very interesting come November.

Meanwhile, the Pickens Plan is beginning to work its way back into the spotlight after a few months of licking its wounds. T. Boone Pickens is slugging it out in front of Congress as we write this, pushing for natural gas transportation support, while representative from Big Coal and Big Oil try and bat back natural gas support. At this point Mr. Pickens appears to be receiving a pretty cool reception, but appearances can be deceiving. A large part of the question is how much a retrofit to a (liquid) gas-burning vehicle will cost…a few hundred, or a few thousand dollars? But we wouldn’t be surprised if pilot programs start showing up before the year is out. We’ll keep you posted.

If there’s one thing we hate, it’s when the big story of the week takes place on a Monday, and has already played out by the time we release the newsletter. This was one of those weeks.

On Monday, a number of the major financial papers reported that the EIA, the information arm of the Energy Department, is going to change the way natural gas production is calculated for its 914 report, the report that details monthly natural gas production levels throughout the United States. The new calculations should reveal that natural gas production is substantially lower than was previously thought…perhaps as much as 10% less.

Basically, EIA wasn’t keeping up with the times. It was using figures from a relatively small number of large producers to extrapolate across the industry. That might work for some markets, but not the rough-and-tumble, long tail world of natural gas. Accurate figures require more attention be paid to the mass of small-scale producers who respond more quickly to trends in demand, often by shutting down and reducing supply.

NYMEX responded to this news by going on a bit of a one-day buying spree. But as the week has progressed, and cooler heads have come to prevail, the market has gradually slid back to its previous level, just below $4.00. By tomorrow, things should be right back to where they were before the reports came out. Today’s storage report, which showed an injection of 31 Bcf…right where everyone expected it to be…sealed the deal.

That’s not the end of the story, however. It’s just getting started, and is about to get a whole lot more interesting.

The EIA will release its first 914 report using the new calculation methods at the end of this month. And everyone is expecting a report that shows substantially less natural gas actually on the market than had been previously thought.

Is this going to be a big deal for prices? Well…maybe.

While the new figures will come as a shock to a lot of people, they won’t come as a shock to everyone. Distrust of the EIA reports has been high for some time in the industry, particularly among the more knowledgeable traders. Among these traders, reaction to Monday’s news was mostly a shrug…public verification of something they already knew. And people who buy and sell on the spot market, dealing with the actual commodity, had a pretty good idea of how much natural gas was actually available on the market.

And revised figures or not, it doesn’t change the fact that the natural gas supply picture in America is more stable than ever before.

But as we’ve seen before, the knowledgeable traders often don’t call the shots on NYMEX. We wouldn’t be surprised to see a substantial uptick when the new 914 hits the streets, especially if the revised production figures are substantially lower than previous reports. The question then will be whether, as happened during this week’s preview, things settle down, or they keep on going. We saw NYMEX maintain a rally that seemed built on nothing but brio all the way through this past Winter, right up to the start of injection season. There are a lot of people who would be way happier to see natural gas go past $5.00 and stay there, including a large number of reputable analysts who had gas pegged to do that in 2010.

In a speculative market, information has two kinds of value: what it tells you about what’s actually happening in the market, and what people think it’s telling you. From the first standpoint, this week’s announcement is a welcome change, but not a market-changer…markets have always adapted to improvements in reporting accuracy. It’s the second standpoint that will make things interesting.

We’ve been in this place before. Market fundamentals point to a continued downward trend. Irrational exuberance points up. You’ve got to decide which you believe will prevail. Cost Containment Internaitonal is here to help.

A Democratic president took the initiative yesterday to encourage drilling off the Atlantic Coast.

Strange days, indeed.

The weekly storage report came in with a 12 Bcf injection, slightly under predictions, so NYMEX is throwing itself a bit of a party, pushing prices back up above $4.00 after an early dip. We saw this behavior earlier in the year, with the market overreacting to marginally good indicators. In this case, with a new front month on the books, much of today’s rally is short covering. The middle of March saw a record number of shorts in natural gas…investors betting on a continued drop in prices…and today’s report is prompting a lot of people to dump their shorts. It’s beginning to feel like NYMEX is lurching towards support, but it’s early yet.

We’ll be looking to see how prices line up over the next few weeks. If the trend continues, we’ll be looking at level prices right through the fall into the Winter months. If that continues, look for a year full of boring weekly storage reports. There will be no big buys, no massive storage, like last year, because there won’t be enough play in the market price to make it worthwhile to pay for storage.

All of which continues the trend towards a sedate 2010 in the natural gas market. And as we’ve said before, a sedate market means people need Cost Containment International more than ever to get their best deals.

Meanwhile, what are we to make of President Obama’s energy proposal? At the moment, not much. It’s clear the proposal to open parts of the Atlantic coast to exploration is a peace offering to drill-happy opponents of other aspects of the plan, including higher fuel standards for cars, acceptance of his climate change proposals, and a gradual shift in America from a fossil-fuel-based energy policy to a green-electricity-based policy. If you’re an oil man, the Atlantic seaboard is very inviting territory: there are strong proponents of deep-water drilling who speculate that vast oil reserves exist at great depths within America’s offshore borders. But this is highly speculative stuff. And any real results won’t be seen for years.

There is also the fact that nuclear energy once again rears its head in the mix. Interesting words to come out of the mouth of a Democratic president.

There are two possible interpretations to what’s going on. On the one hand, Obama may simply be trying, much as he did with health care, to cobble together something that will have enough support to pass Congress. On the other hand, he might be trying to find a middle ground in what is currently a rancorous, and almost completely gridlocked, debate on America’s energy future.

All sides in the energy debate are currently buried deep in their own corners, and no one is offering a comprehensive plan that realistically draws a map to the future that includes both a clean energy endpoint and an economically viable program that get us there.

It may be that by taking the heat from all sides, President Obama is giving all parties a bit of cover to take a few steps onto common ground. If this is the case, we applaud him. Let’s see what happens next. April Fool’s Day only comes around once a year. There won’t be any excuses for the next words that are spoken.