Volatility

After gapping higher on the open and racing to new highs,natural gas futures were hit with a powerful wave of selling latein the session that trimmed most of yesterday’s gains and lefttraders wondering if more selling is in store for the market on itsexpiration day today.

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.

In an attempt to put a lid on price volatility this summer, FERClast week approved temporary bid caps of $1,000/MWh for the NewEngland and New York power generation markets, bringing the bidceilings for the entire Northeast and Mid-Atlantic regions intosync.

In an attempt to put a lid on price volatility this summer, FERCyesterday approved temporary bid caps of $1,000/MWh for the NewEngland and New York power generation markets, bringing the bidceilings for the entire Northeast and Mid-Atlantic regions intosync.

FERC last week conditionally approved a significant re-design ofthe New England bulk power market in an attempt to reduce the pricevolatility stemming from congestion of the region’s transmissionsystem. But it could be as long as two years before the regionalmarket feels the benefits of the changes.

FERC yesterday conditionally approved a significant re-design ofthe New England bulk electricity market in an attempt to reduce theprice volatility stemming from generation shortages and congestedtransmission systems. But it could be as much as two years beforethe regional market feels the effects of the changes.

The market was beginning to show more signs of volatilityWednesday, although the swings weren’t quite as wide-ranging asmost of those last week. Cash numbers fell by 10-15 cents at nearlyall points but were expected to rebound again today after futurestraders treated AGA’s afternoon storage report as bullish.

Looking like the readout on an EKG machine gone mad, natural gasfutures soared, dipped then rallied again yesterday as tradersdealt with a bevy of somewhat contradictory but certainly confusingpieces of fundamental news. With Wednesday’s 25.9-cent advance and$4.073 settle, the June contract climbed into the rarified air of$4.05-plus prices, which have been achieved only in seven othertrading sessions during the 10-year history of natural gas futures.

Price spikes, volatility, tight margins and stiff competitionhave prompted many energy marketers to reconsider their positionsand strategy, and this is causing changes in the energy marketingarena as a whole, according to a new report by Frost &Sullivan.