Volatile

If you thought natural gas prices were volatile last summer, you haven’t seen anything yet, according to Raymond James & Associates. During the peak heat of summer 2001, the company forecasts that gas prices will rise above $6/Mcf, and remain above the $5/Mcf mark in the longer term.

Few can deny that the two biggest factors influencing prices inthe volatile natural gas futures arena are storage and weather.Accordingly, a combination of record cold temperatures andlarger-than-expected storage withdrawals through November andDecember caused natural gas prices to more than double, leavingregulators stunned and sending buyer to the poor house. And whileit is doubtful that natural gas prices will return the ol’two-dollar days anytime soon, the futures market did take solid ahit yesterday and yes, storage and weather were to blame.

Very high and very volatile energy prices, coupled with the fearof what they will do to overall economic growth, were among themain reasons cited by energy analysts that energy companies of allshapes and sizes were out in front of the U.S. stock market dipover the last two days.

True to form, Wednesday in the natural gas pit at Nymex had itsshare of price volatility as traders factored the latest storagedata into the market. After a relatively quiet morning, the Octobercontract exploded higher to $5.38 and then tumbled lower to $5.26between 2:00 and 2:10 p.m. As it turned out, the prices produced inthat small trading window held as the prompt month’s daily range.October finished at $5.318, down 4.5 cents for the session.

The natural gas futures market had one of its more volatileweeks last week as daily price fluctuations averaged more than 20cents and price ranges averaged a substantial 28 cents. As ofFriday afternoon, the July contract stood at a lofty perch of$4.160/MMBtu, 11.7 cents higher than the previous Friday and 94.3cents above where the near-month contract stood one month earlier.

Demonstrating the volatile nature of the stock market this week,Dynegy’s stock price dropped almost 7% yesterday despite ChuckWatson, CEO of Dynegy, announcing that the company expects firstquarter earnings to be 20% higher than industry estimates.

Following one of the quietest trading sessions in recent memoryThursday, the futures market snapped back to life Friday as tradersetched out a wide, 20-cent range in bumpy, pre-weekend dealings.After trading as low as $2.55 and as high as $2.76 the Novembercontract finished the week strongly, gaining 5 cents to $2.692.Estimated volume of 79,860 confirmed the heavy activity.

Buoyed by another day of strong demand in the physical market,the futures market trended higher Friday in a choppy, range-boundtrading session. After opening just two pennies above Thursday’slow of $2.67, the September contract rumbled 2.2 cents higher onthe day to finish at $2.745.

After a volatile three days of seller-dominated trading Tuesday,Wednesday and Thursday last week, the futures market was quietFriday as light pre-weekend short covering was almost perfectlymatched by follow-through selling. The August contract could manageonly a 4.5-cent trading range before finishing 0.1 cents higher forthe day at $2.163. Estimated volume was relatively modest, with55,158 contracts changing hands.