Volatility was once again the name of the game Monday in the natural gas pit at Nymex, as local traders found it easier to push prices around in a market noticeably void of its once-dominant market-maker, Enron. The exchange last Thursday forbid its floor members to accept an order placed by Enron or its affiliates without written authorization, and since that time the market has experienced volatility that one would not expect considering the lack of fundamental or technical impetus. Rebounding nearly 8 cents from a $2.555 low notched early in the session, the January contract finished at $2.63, down 6.7 cents for the day.

Although he admits it is still too early to tell if the increased volatility is a function of the disappearance of the market’s largest trading partner, Tom Saal of Miami-based Pioneer Futures believes that local traders were able to move the market in a way they have not been able to do in quite some time. “They came in and sold it down, but when it became apparent they were not going to be able to pressure January to new lows, they covered their shorts,” he said. The rally that ensued propelled prices from $2.55 to $2.66 in about two-and-a-half hours. “There was no offsetting commercial selling. If Enron was there, it is really hard to say whether we would have finished so strongly,” Saal added.

Looking ahead, Saal cannot make the case for prices tracking consistently higher or lower in reaction to the apparent collapse of Enron. Rather, he feels that the net effect on the market will be an increase in volatility. “Volatility is a natural result of a decrease in liquidity and it is directionless. All I can tell you is to expect an exaggeration of what was going to happen anyway.” And while Saal would not make any prognostications as to which direction that exaggeration might lead prices, he did warn traders to be wary of Wednesday’s storage report, which is expected to supply the market with its first withdrawal figure of the season.

Citing degree day data from the National Weather Service suggesting it was warmer last week than had been previously forecast, Thomas Driscoll of Lehman Brothers looks for a withdrawal of 10-15 bcf, down from his previous estimate of 40 Bcf. Comparatively, 73 Bcf was pulled from underground storage facilities a year ago and the five-year average calls for a net withdrawal of 55 Bcf. Storage is set to be released at 2 p.m. (EST)

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