Volatile

Anyone watching and listening to energy markets knows that with higher and more volatile commodity prices comes the more frequent utterance of words such as “speculation” and “manipulation,” often in the same breath.

With volatile swings and record high prices over the past few years, the segment that “Enron made famous — energy trading — is springing to life again,” according to a new report by Dublin, Ireland-based Research and Markets.

Citing the prospect of continuing high and volatile commodity prices, Fitch Ratings’ 2007 outlook for the U.S. power and gas industries is generally stable, particularly in the competitive part of the industry. Not so fortunate are the regulated gas and electric sectors, which face “a challenging environment.” And no company should become complacent. Risks, demand and interest rates could change over the longer term.

As another footnote to the broad impact of historically high and volatile natural gas prices, the California Department of Water Resources (DWR) has released a request-for-offers (RFOs) seeking a consulting firm’s help and advice in dealing with natural gas fuel. Bids from an individual consultant or firm are due Monday, and a contract would start July 1, DWR said.

Increasingly concerned about declining oil and natural gas reserves and volatile prices, many energy executives expect to “significantly” boost upstream capital spending in the year ahead, according to the results of a survey conducted by KPMG LLP.

Putting in a wild and volatile day of trading Wednesday, March natural gas futures ratcheted higher in the morning to put in a $9.820 high before collapsing lower. After notching a low of $8.700 late in the session, the prompt month settled at $8.723, down 59.3 cents on the day.

With natural gas prices expected to remain volatile and high, the rush to coal-fired electric generation is back. Everything from vertically integrated utilities to merchant operators are proposing new plants, as well as hyping the prospects for “clean coal” facilities, but some old-fashioned caution is recommended in a report released Tuesday by Standard & Poor’s Ratings Services (S&P), examining whether high yield or high grade financing will build these plants.

In order to avoid the volatile spot market and lock in a discount on gas supply, Public Gas Partners, Inc. (PGP), a non-profit gas agency formed a year ago by seven southeastern municipal utilities, said Tuesday that it purchased 115 Bcfe of proved natural gas reserves (73% proved, developed and producing) and 30 Bcfe of probable and possible reserves in four gas transactions at a total cost of about $330 million.

There are growing market concerns about widening and volatile Midcontinent basis and the likelihood that it will get worse as more gas flows East from the Rockies. The situation was largely created by unexpected production growth (or absence of declines) in Midcontinent producing basins and pipeline constraints downstream of the new Cheyenne Plains pipeline system, according to data from Denver-based consulting firm Bentek Energy. Other events on the horizon could make it even worse.