BWS Blog


Natural Gas Shrugs Off Mildly Supportive EIA Data

Thursday, December 14, 2017 at 4:04PM


Natural gas prices logged another day of declines today, though they settled a bit above their lows from a couple days ago. Still, they set a new daily low in this recent rout despite bouncing off it on another surge of buying volume.

natural gas commodity weather

Again today, just like yesterday, the daily price action fell in line with our Morning Text Message Alert sent out to clients before 7 AM, which outlined a bit of short-term downside off warmer overnight model trends but an overall neutral sentiment for the trading day.

natural gas commodity weather

Then at 10:30 AM Eastern the Energy Information Administration announced that we had withdrawn 69 bcf of gas from storage in the past week.

natural gas commodity weather

This print came in slightly bearish to the 5-year average and far more bearish to year-ago levels, yet was still far less bearish than the small injection that was reported last week.

natural gas commodity weather

More importantly, the print missed 5 bcf bullish to our estimate, and in our EIA Rapid Release sent out within 10 minutes of the report to clients we noted that this was a slightly bullish report which would strengthen $2.65 support. Prices then bounced off that level shortly after our report was sent out.

natural gas commodity weather

As mentioned in the report, we see weather increasingly important too. Earlier today it was clear that overnight bearish weather trends were holding the front of the natural gas strip, and the strip settled with the smallest losses later on along it.

natural gas commodity weather

Part of this may be that later strips found more support off a tighter EIA print as well, though price action into the weekend may tell more of a story about what is likely to drive price action next week.

Prices also found support off a colder run of the American GFS ensembles this afternoon, which we warned clients was likely in our Morning Update. They decreased the southeastern ridge modestly in the long-range, allowing for a greater expanse of cold across the 8-14 Day time frame in their afternoon 12z run, as seen below (image courtesy of the Penn State E-Wall).

natural gas commodity weather

We continue to monitor other afternoon model guidance, determining where risks are skewed across ensemble members to see where models are likely to trend in the future and how that is likely to move the natural gas market. Combined with our other fundamental and spread/technical analysis, we focus daily on the role of weather, balance, and other technicals in the natural gas market, keeping clients ahead of the next natural gas move. Our Afternoon Update broke down our latest Gas Weighted Degree Day (GWDD) forecast and updated our weather-driven natural gas sentiment, outlining expected market catalysts and drivers headed into the weekend. To give it a look, try out a 10-day free trial here.




Weather Saves Natural Gas From Further Declines

Wednesday, December 13, 2017 at 5:02PM


Natural gas prices attempted to decline further mid-morning, trying to reverse from overnight buying on a few colder weather models. However, prices quickly reversed off this selling for the first time in awhile, and a bullish run of American modeling guidance pulled prices right into resistance at $2.75, which they then gradually pulled back from through the rest of the day.

natural gas commodity weather

This $2.75 resistance level was exactly the level we were watching this morning when we warned our subscribers just before 7 AM in our Morning Text Message that model guidance had trended more supportive overnight.

natural gas commodity weather

Prices did stabilize eventually, and test that exact resistance level, but were unable to break out higher. Weak cash prices certainly did not help.

natural gas commodity weather

Volatile model guidance also proved to be a problem, as European modeling guidance trended back warmer this afternoon after some colder runs overnight. The result was that even though the January/February F/G spread had been gaining ground all day, it actually settled a couple ticks down.

natural gas commodity weather

This is one of the spreads we watch both daily and intraday, using it to alert clients what we see as a major driver of natural gas price action that day. As an example, we identified mid-day yesterday in our Note of the Day that balance would likely continue driving natural gas prices lower, but we similarly forecast that colder trends in weather model guidance would be the one thing that could help support the natural gas market.

natural gas commodity weather

Sure enough, those colder trends came overnight, and they were the one thing that was able to try and save a natural gas market that is otherwise in significant decline. The Climate Prediction Center even picked up on them in their afternoon update today, where they decreased warm risks in the Southeast in line with our forecast yesterday.

natural gas commodity weather

Yet the natural gas market is still searching for balance, as later contracts continue to weigh on the front and we have seen some major losses. As we shared earlier on Twitter, our Morning Update showed how even later 2018 natural gas contracts are at 6-month lows following heavy selling.

natural gas commodity weather

Accordingly, weather matters, but of course is not the only factor driving the natural gas market. We continue to track balance, strip/spread price action, and of course weather to determine both the magnitude in weather changes and the eventual impact in the market. By keeping clients ahead of the next weather model run and informing them about how much we expect any GWDD losses/gains to matter, they are able to confidently dive into the natural gas market, knowledgeable about what is driving daily price action. To try out a 10-day free trial to any of our subscription levels and see for yourself how we help clients navigate the natural gas market, sign up here.




The Natural Gas Rout Continues

Tuesday, December 12, 2017 at 4:34PM


Natural gas prices are continuing to search for a bottom. After a modest gap up and stable prices yesterday, sellers returned with a vengeance today to pull prices down over 5% on the day.

natural gas commodity weather

Yet again we saw the rally as being primarily balance-driven, as the entire natural strip got hit hard.

natural gas commodity weather

With short-term cold, the front of the natural gas curve was unable to decline much more than further back contracts, with cash prices mostly stable on the day.

natural gas commodity weather

Despite the massive decline in prices along the natural gas strip, the March/April (H/J) spread settled at the same level it did last Thursday, even with the January contract a full leg lower.

natural gas commodity weather

This indicates the focus remains much more on current market balance than forward weather expectations, which is no surprise given production remaining near record levels (and far above year-ago levels, per the EIA).

natural gas commodity weather

EIA data last week seemed to confirm such loosening with a small injection being reported when we tend to see a modest drawdown from storage. Though the data on Thursday is supposed to be more supportive, we have quickly seen any supply shortage get erased by lackluster demand and impressive production.

natural gas commodity weather

Yet beleaguered bulls are still looking towards the end of December, where we see sizable cold risks setting up that have trended even colder in recent Climate Prediction Center forecasts, as we have been warning clients.

natural gas commodity weather

Bulls also look to past years where late-month cold has helped bolster cash prices and the January natural gas contract over the February contract into expiry.

natural gas commodity weather

There do remain some late-month cold risks, and we have been closely monitoring them for clients, explaining how they have been shifting overnight and what impact on natural gas prices they are likely to have. This analysis, overlaid with our twice-daily 15-Day GWDD reports, helps traders view not just the magnitude of weather shifts but also the relative importance (of which, admittedly, there was rather little today). This knowledge of what is driving price helps traders know where to focus in the market, allowing them to track the most relevant data and know how best to manage risk. To try out a 10-day free trial to one of subscription services and see how we can help you navigate the natural gas market, you can sign up here.




Natural Gas Gaps Up, But Struggles To Continue Higher

Monday, December 11, 2017 at 4:16PM


Natural gas prices gapped up a couple percent last evening and held there through much of the day today, settling up just over 2% on the day. Yet prices were not able to continue higher from the gap, raising concerns for bulls that expected more of a recovery.

natural gas commodity weather

The gap up was not a surprise to subscribers, as on Friday we alerted that there were more bullish than bearish long-range weather risks headed into the weekend, and that we expected model guidance to finally pick up more of them by Sunday evening. We then saw long-range cold risks as one of the key driving factors that supported prices today.

natural gas commodity weather

The weather's influence can best be seen by the relatively large move out we saw today in the March/April H/J spread as traders became a bit more concerned about limited stockpile levels heading through the winter with late-month cold.

natural gas commodity weather

Seen another way, the spread recovered a significant amount of its recent losses despite a relatively small prompt month price move.

natural gas commodity weather

Meanwhile, the gain in the January contract about matched the gain in Henry Hub cash today, as short-term cold lingers as well.

natural gas commodity weather

For futures traders, though, all eyes remain on long-range forecasts, as we see significant warmth in the medium-range before we cool off in the long-range. This is best seen in recent trends in Climate Prediction Center forecasts as they pick up on long-range cold risks.

natural gas commodity weather

The intensity and duration of any incoming long-range cold should determine if and how much prices are able to recover after their recent heavy selling in the last couple of weeks. Our twice-daily updated 15-Day Gas Weighted Degree Day (GWDD) forecasts and weather-driven natural gas sentiment updates for clients will help keep them aware of changing atmospheric conditions and forecast risks, knowing which way weather models are likely to trend before they get released. To view our latest forecasts and sentiment in our Afternoon Update, try out a free 10-day trial here.




Natural Gas Prices Linger Near Support

Friday, December 08, 2017 at 4:57PM


After such intense selling yesterday, natural gas bulls cannot be happy with the lackluster recovery in prices today. Though we did see some buying activity overnight, sellers came in through the day to keep prices below our first $2.82 resistance level, as prices were instead range-bound in a tight 6.3-cent daily range.

natural gas commodity weather

As can be seen, prices held just above the $2.75 support level. This is something we explained to clients in an intraday note was likely to hold given price action along the natural gas strip.

natural gas commodity weather

This came after we first identified $2.75 as a critical support level yesterday morning.

natural gas commodity weather

Admittedly, we had expected bulls to flex a bit more muscle in the face of some of the cold we have seen on guidance over the past week, as we still are forecasting above average GWDDs through the next 15 days (though we did shed a few this afternoon). This led us to hold sentiment that had a bit too bullish of a lean in a week where the front of the natural gas strip logged significant losses.

natural gas commodity weather

A significant portion of that elevated GWDD forecast is thanks to a strong eastern cold shot expected to be centered on December 13th, as seen on the afternoon 12z American GFS ensembles below (courtesy of the Penn State E-wall).

natural gas commodity weather

Yet it is also clear that forecasts in the medium-term have warmed, as seen in recent Climate Prediction Center forecasts.

natural gas commodity weather

This appeared responsible for some of the selling yesterday, yet today it was the back of the natural gas strip that logged losses, as the front actually settled up a few ticks.

natural gas commodity weather

We actually did thus see weather support the front of the strip, and buyers did try and move us higher initially this morning. But balance concerns remain, as Thursday's EIA print was quite bearish and indicated significant market loosening amidst record production levels.

natural gas commodity weather

All this sets up for a very interesting week of natural gas trading next week, where we expect both the latest production and weekend demand figures will be on the minds of traders as much as the latest weather expectations. We have noticed a tick up in weather forecast uncertainty recently as well, meaning we would expect that winter volatility is not going anywhere next week.

To help navigate this volatility, try out a 10-day free trial to our subscription service, which offers 15-Day GWDD forecasts twice a day along with our latest natural gas sentiment in morning and afternoon updates, live technical/fundamental analysis, text message and trade alerts, and so much more. As the first service to integrate weather data alongside natural gas strip/technical analysis while processing other fundamental factors, it helps provide traders a holistic view of weather's role in the natural gas market, letting them know when to take advantage of the latest forecasts or when to hold back (as seen again today when we saw the supportive role weather would have propping up the front of the natural gas strip). So try out a 10-day free trial or shoot us an email to jacob AT bespokeweather.com to chat more about it!




Natural Gas Was Balance-Driven Yesterday, Weather-Driven Today

Thursday, December 07, 2017 at 4:22PM


Another day, another large natural gas red candle. That seems to be the trend of late, with prices down over 13% from their settle last Wednesday.

natural gas commodity weather

Yet while we have seen major declines a number of days, the catalysts for each have varied. Yesterday's blog was about how selling appeared to be balance-driven. Today it was clear that selling was primarily weather-driven, with significant heating demand losses on European guidance overnight. Losses at the front of the natural gas strip were accordingly most extreme.

natural gas commodity weather

Shown another way, after holding relatively firm through recent selling, F8/G8 plummeted today.

natural gas commodity weather

That would seem to indicate that weather is back in charge of price action, at least partially. Additionally, we can see how little traders are concerned about weather through the remainder of December by how physical gas is reacting; prompt month futures actually settled below the Henry Hub cash average for the day.

natural gas commodity weather

This is certainly not unprecedented, though it has been a little while since this occurred, with the last prompt expiry below cash coming on November on November 24th. Yet it tends to be more rare in December, where heating demand seasonally increases through the month.

natural gas commodity weather

Additionally, prompt month natural gas prices are more oversold than they were on the 24th.

natural gas commodity weather

Regardless, it is clear winter volatility is here to stay, and weather is back to playing a significant role in forecasts as day-over-day changes in GWDDs grow. The result should be further volatility headed into the weekend, and we will continue to alert clients of both the catalysts and directional risks behind any move. To see our latest Afternoon Update, which outlines our natural gas price action expectations over the next week alongside our 15-Day GWDD forecasts, weather risk analysis, and market technical analysis, try out a 10-day free trial here.




Balance-Driven Selling Keeps Natural Gas Flat

Wednesday, December 06, 2017 at 4:33PM


After a couple days of heavy selling, natural gas prices settled down today, trading within a more narrow 7.7-cent range. Prices closed up slightly on the day, though were up more significantly this morning before being hit by another round of mid-morning selling.

natural gas commodity weather

Prices were able to bounce cleanly off $2.88 support again today, something we highlighted for clients in our pre-7 AM Eastern Morning Text, but they did not quite reach the $2.98 resistance level we had expected them to as sellers hit prices just after 9 AM.

natural gas commodity weather

It was certainly not surprising that today was the first day natural gas prices were able to find a footing, however. As long ago as last Friday in our Pre-Close Update we were warning clients that today we expected to see the first real cash reaction to incoming cold, and that we could end up seeing that support the natural gas market.

natural gas commodity weather

This is exactly what happened, with physical day-ahead Henry Hub cash prices gaining modestly on the day, though futures only garnered support from this as morning selling ensured there was no real sustained bump in prices.

natural gas commodity weather

In fact, gains across the natural gas strip today were rather consistent (albeit small). We noticed some losses much further out along the strip, and earlier this morning it was later contracts that seemed to drag down the front of the strip, indicating it was more balance than weather driving price action.

natural gas commodity weather

Such price action should not be all that surprising, as in recent selling later natural gas contracts have come under sizable pressure. We did note this morning that yesterday the later natural gas calendar strips found a bit of support even as the 2018 calendar strip sold off, seeming to indicate that the market was succeeding in pricing in recent loosening.

natural gas commodity weather

But again today we saw balance-driven selling erase early natural gas gains, even as weather forecasts were little-changed. We monitored this closely today, and it allowed us to properly alert clients late this morning in our Note of the Day that $2.88 support would likely hold in the face of heavy selling.

natural gas commodity weather

This is a perfect example of how we integrate our weather analysis with real-time natural gas technical and fundamental analysis, helping clients navigate the ins and outs of the natural gas market and determine exactly what seems to be driving price action and where risk is skewed. In our Afternoon Update today we broke down the latest weather forecasts through the next 3 weeks and explained how we see them impacting prices, while also summarizing the current technical picture of the natural gas market and outlining our next expected move. To see this Update, try out a 10-day free trial here




Natural Gas Move Another Leg Lower Despite Inbound Cold

Tuesday, December 05, 2017 at 5:18PM


Natural gas prices dropped another 2.5% today as they continued to encounter heavy selling from slightly easing cold weather forecasts and elevated production levels. The prompt month January contract bounced right off a $2.88 support level we had been watching, closing a few cents off the lows.

natural gas commodity weather

This came as cash prices were a bit more firm, declining just a few cents on the day as cold began moving in across the country.

natural gas commodity weather

Selling today was not quite as much of a surprise, however, as we saw overnight weather trends as bearish enough to pull prices a leg lower. We warned clients about a bit more downside this morning, and natural gas prices fell right into our support level from $2.88-$2.92.

natural gas commodity weather

This combined with elevated production and lackluster demand in the face of significant warm the past week and a half to push the natural gas strip lower, something we noted in our Note of the Day to clients yesterday morning.

natural gas commodity weather

This came after our Afternoon Update yesterday where we similarly identified another short-term leg lower in prices.

natural gas commodity weather

Meanwhile, in our Morning Update this morning we showed how even contracts out in 2019 took a significant beating amidst a loosening balance the last couple of trading days, indicating early week selling was more not primarily weather-driven.

natural gas commodity weather

Again today we saw the entire front of the natural gas strip decline.

natural gas commodity weather

Yet cold weather risks have allowed F/G to stay relatively firm in the face of significant selling.

natural gas commodity weather

Tomorrow should be the first day of December where heating demand moves close to seasonal averages, meaning traders will be closely watching how cash prices and the front of the natural gas strip react. Our Afternoon Update put that in context with Thursday's expected bearish EIA print and the latest afternoon weather data, explaining where we see risk for prices to head into the end of the week. To give this report a look, and begin receiving all of our other detailed weather and natural gas-driven content, try out a 10-day free trial here.




Natural Gas Takes Another Beating

Monday, December 04, 2017 at 4:33PM


Natural gas prices declined another 2.5% today after gapping up modestly last evening. Prices lingered up into this morning before a wave of morning sellers hit prices hard, and we were unable to recover losses through the trading day, settling just a couple cents off the lows.

natural gas commodity weather

Cash prices were not quite as pressured, actually rising slightly after Friday's intense selling.

natural gas commodity weather

The result was another decline in the prompt/cash spread, which was near the top of its range to close out last week.

natural gas commodity weather

Despite intense selling along the entire natural gas strip, F/G was relatively firm, indicating it is not near-term weather that appeared to be driving price action (as significant cold is still forecast to pull heating demand above average over the next 2 weeks).

natural gas commodity weather

Rather, it appears the market initially reacted to bullish weather expectations last evening, when it gapped up on weekend GWDD adds. This fit with our analysis in our Friday Pre-Close Update, where we warned clients that bullish weather risks over the weekend would likely allow prices to remain elevated headed into the next week.

natural gas commodity weather

Yet in that same report we similarly warned that the natural gas technical picture was deteriorating heading into the weekend.

natural gas commodity weather

Clearly, weather was unable to bail us out today, and the entire strip moved another leg lower. For those looking further along the natural gas strip, this was not much of a surprise, as selling on Friday hit not just the front of the natural gas strip but also contracts into 2019, as seen in our Morning Update today.

natural gas commodity weather

This would seem to indicate that the market focused more on long-term supply/demand balance than weather today, though we have noticed a varied role for weather in price action over the last week. In today's Afternoon Update we break down the role of both short and long-term weather expectations in recent natural gas price action and demonstrate where we see the risks to both prices and weather forecasts are over the coming week. To give this report a look, alongside all our other research combining the latest weather forecasts with natural gas fundamental/technical analysis, try out a 10-day free trial.




Mid-December Cold Supports Natural Gas Prices

Friday, December 01, 2017 at 4:13PM


Natural gas prices settled up modestly on the day, but seemed to sputter into the weekend as most gains came overnight with prices gradually declining through the day today. Prices seemed to bounce right off the $3.12 resistance level, unable to find much of a sustained footing after 8 AM Eastern.

natural gas commodity weather

Part of the reason was that cash prices today were incredibly weak in the face of very strong weekend warmth that will kill heating demand.

natural gas commodity weather

We warned our clients about this risk in our Morning Update today after correctly identifying yesterday afternoon that overnight weather model guidance would help natural gas prices bounce off the support they tested.

natural gas commodity weather

Despite weak cash prices, we still saw the most gains on the day at the front of the natural gas curve.

natural gas commodity weather

The move in F/G today, meanwhile, showed that despite weak cash prices the market is beginning to price in colder weather risks through the middle of December.

natural gas commodity weather

As we head into the weekend and early next week, traders will obviously be keeping a close eye on the weather, attempting to determine just how intense any mid-month cold is. Afternoon Climate Prediction Center forecasts continued to show significant cold risks.

natural gas commodity weather

The American CFSv2 climate model has continued to show risks that sizable cold lingers into Week 3 as well, with some risks into Week 4 along the East Coast. This guidance is notoriously volatile, however, and both Week 3 and especially Week 4 forecasts can frequently flip rapidly.

natural gas commodity weather

Either way, it is clear that weather is supporting this market, and traders will certainly struggle to update heating demand expectations amidst shifting weather forecasts. We work to help traders identify the risks within forecasts to determine where value along the natural gas strip exists, and provide hypothetical trade alerts to translate our weather-driven analysis into actionable content. This week we issued two Trade Alerts which executed a profitable trade; Trade Alerts are published when there is an especially high confidence opportunity to take advantage of weather-driven mis-pricing in the natural gas market. We have averaged one a month over the past four months, and each one has proven profitable.

natural gas commodity weather

As we head through December we expect to see a number of additional weather-driven moves in the natural gas market that we will aim to keep traders ahead of. We just published our Pre-Close Update as well, which outlines expected forecast changes over the weekend and explains our natural gas price action expectations for early next week off these forecasts. To give this report a look ahead of the weekend close, and to begin receiving all our Trade Alerts, Text Alerts, and Updates that contain our weather and technical-driven natural gas analysis, try out a 10-day free trial and see how we can keep you ahead of the next big natural gas move.




V-Tops and V-Bottoms: Natural Gas Winter Volatility Is Back

Thursday, November 30, 2017 at 4:35PM


Natural gas volatility has returned as traders attempt to price in variable heating demand expectations into the middle of December. After three straight days of rallying, today prices declined, and the decline was not small. The January natural gas contract pulled back almost 5% after reversing off the 60-DMA yesterday.

natural gas commodity weather

As would be expected with such heavy selling, losses were worst at the front of the strip, but even the Spring 2018 strip saw decent losses on the day too.

natural gas commodity weather

Cash prices were of no help either.

natural gas commodity weather

The result is that 30-day natural gas annualized volatility is now far higher than it was at any point this past summer or fall.

natural gas commodity weather

The 5, 10, and 30-day trading ranges all set new highs as well, with large intraday moves becoming the norm again.

natural gas commodity weather

Prices initially attempted to stabilize following the morning EIA print, but the slightly bearish nature of the print (it came in as a -33 bcf net implied flow for last week, vs. our estimate of -37 bcf) appeared to help push prices lower through the day.

natural gas commodity weather

Our EIA Data Rapid Release, sent out to clients within 10 minutes of the data release, picked up on the bearish nature of the print. We saw this print as confirming the loosening balance that has resulted from recent production increases, which are expected to absorb some additional weather-driven demand.

natural gas commodity weather

Still, prices continued selling off through the afternoon as well, settling near the lows of the day. The market did not find afternoon weather model guidance particularly impressive, and CPC forecasts stopped trending colder in the 8-14 Day time frame, instead trending a bit warmer across the center of the country.

natural gas commodity weather

Now, attention turns back to expected forecast trends, as each of the past four weekends have featured rather significant gaps into the Sunday evening open off shifting weather expectations. Our Afternoon Update today outlined the latest weather modeling and explained what the expected influence of weather will be on prices into the weekend and through next week. To take a look at this report and begin reading all our other weather-driven natural gas analysis, try out a 10-day free trial.




Natural Gas Rallies Again, Though Pulls Back From Resistance

Wednesday, November 29, 2017 at 4:59PM


Natural gas prices have continued their run this week, closing up three days in a row following their previous 5 straight days of selling. We rolled over to the January contract with the December expiry yesterday, and despite a morning rally prices did pull back a bit through the afternoon. Still, between the contract roll and the continued rally, weekly prompt month gains are very impressive.

natural gas commodity weather

While the prompt month rally between the contract roll and continued January contract strength was impressive, more impressive was Henry Hub cash strength in the face of bearish weather expectations the next couple of days, as the day-over-day cash increase beat the day-over-day prompt month rally (including the contract roll).

natural gas commodity weather

Thus the impact of medium and long-range cold weather forecasts are now evident on charts of both prompt month natural gas and Henry Hub cash prices.

natural gas commodity weather

These cold forecasts are getting better priced into the market as they become more widely known as well. Climate Prediction Center 8-14 Day forecasts clearly trended towards far higher probability cold today.

natural gas commodity weather

These cold trends have been enough to rally natural gas prices and create the V-bottom we were expecting, yet H8/J8 still remains significantly below where it was the last time prompt month prices approached this level.

natural gas commodity weather

This would seem to represent less concern about current natural gas stockpile levels headed into the winter season, even despite recent colder forecast trends. Part of this could be due to very limited storage withdrawals in the face of short-term warmth. Most estimates (including ours) favor the Energy Information Administration announcing a net implied flow of natural gas that will be above the -47 bcf 5-year average, allowing stockpiles to shrink the deficit they sit at to the average. An even smaller deficit is then expected to be announced next Thursday as well.

natural gas commodity weather

This is thanks to warmer trends we observed last week and are playing out through this week, something we warned clients about over two weeks ago.

natural gas commodity weather

In our Afternoon Update today we outline what our price action expectations are around the EIA data release tomorrow morning, and our Morning Update tomorrow morning will feature our updated final projection for tomorrow's EIA print, along with estimates for each of the ensuing 3 weeks. We similarly release an EIA Rapid Release for clients, breaking down the latest EIA print and explaining how we view it in the face of the ever-shifting weather backdrop. To take a look at all of these reports, try out a 10-day free trial, and see how we can help you stay ahead of any big moves within the natural gas market.




To The Moon! Natural Gas Rallied More Than Bitcoin (For Once)

Tuesday, November 28, 2017 at 4:16PM


Today we take a look at an asset that rallied almost 5% day-over-day. No, not Bitcoin (which as we are writing this is up just 3.7%), but natural gas, which is finally realizing long-range cold weather risks. The December natural gas contract went off the board today after a massive jump.

natural gas commodity weather

The result was a significant rally all along the natural gas strip.

natural gas commodity weather

Additionally, for the sixth year in a row, that Z/F spread narrowed on Z (December) expiry day, though this year the narrowing was more significant than it has been as weather provided a further catalyst.

natural gas commodity weather

This rally has been fitting with a number of our more recent expectations. Our Weekly Natural Gas Report from last Monday (11/20) highlighted that prices should set a bottom last week and rally into December off increased cold, something we are now seeing.

natural gas commodity weather

In our Note of the Day from all the way back on October 17th we even highlighted why we saw uncommonly high odds for a cold December, helping traders position in advance of this coming cold snap.

natural gas commodity weather

Now, we see Week 3 CFSv2 American climate guidance showing significant cold risks for mid-December (courtesy of NOAA).

natural gas commodity weather

The 8-14 Day 12z American GFS ensemble 2-meter temperature anomaly forecast also shows significant cold risks across the East now.

natural gas commodity weather

Our latest weather analysis helped us to identify the bullish risks ahead of the rally today, and in our morning Text Alert we warned clients that the January contract was likely to hit $3.12, which we took out late this morning and settled just above.

natural gas commodity weather

In this way, we feel we have a strong grasp on both weather forecasting and the natural gas market, using the latest weather trends and technical analysis to determine where prices are most likely headed. In our Afternoon Update today we outlined how long cold is expected to stick around for, as well as how its intensity should drive natural gas prices over the coming couple of weeks and what our current market sentiment currently is. To give that report a look, along with all our other detailed weather and natural gas content, try out a 10-day free trial.




Natural Gas Gaps Way Up On Bullish Long-Range Cold Risks

Monday, November 27, 2017 at 3:55PM


After a Thanksgiving and Black Friday bloodbath, natural gas prices recovered today by gapping up significantly and holding on to that gap through the trading session today. Though prompt month prices were unable to rally above a resistance level around $2.95 we had been watching, this was still a welcome move for beleaguered bulls.

natural gas commodity weather

The move today came in the face of continued cash weakness, as warm weather over the next week to week and a half will keep heating demand below average and ensure that we withdraw less natural gas from storage than we otherwise would with average weather.

natural gas commodity weather

The front of the natural gas strip thus was clearly supported by weather expectations, with both Z/F and H/J moving out a bit on the day.

natural gas commodity weather

We added a significant number of GWDDs to our 11-15 Day forecasts over the weekend, something that we warned clients in Friday's Pre-Close Update was a real possibility and would likely support natural gas prices.

natural gas commodity weather

In that same report we similarly warned that the natural gas market was seemingly pricing in a "max bearish scenario through the middle of December," meaning that any additional cold would help "stabilize and support this market for next week" as we have seen.

The recent natural gas move also fits with our Note of the Day from last Wednesday, November 22nd, which warned that there was short-term downside for natural gas prices as warmer trends in medium-term forecasts continued, but that a near-term bottom would likely be set for natural gas prices last week and that by this week forecasts should be trending colder. We included the text-only portion of this Note below.

natural gas commodity weather

One piece of data that caught our eye today (and we pointed out to subscribers) was the relatively small move in H/J relative to the size of the price recovery at the front of the strip.

natural gas commodity weather

In our Afternoon Update we outline what we see this meaning in the context of current weather forecasts, and explain where we see both weather forecasts and natural gas prices trending through the coming week. Even deeper analysis is included in our Weekly Natural Gas Update that was released today, which is our flagship 14-page report on all things natural gas from technical analysis to storage dynamics and, of course, the latest weather forecasts. To give these reports a look and begin getting the most in-depth analysis on the overlap between weather and the natural gas market, try out a 10-day free trial.




The Natural Gas Gap Is Finally Filled

Wednesday, November 22, 2017 at 4:21PM


Make it 8 of the last 9 (and now 3 straight) days that prompt month natural gas prices have moved lower. Finally, prices were able to fill the gap below them, just before traders headed out for the Thanksgiving Holiday.

natural gas commodity weather

We had been all over this gap, alerting clients in our Weekly Natural Gas Report last Tuesday that the gap was likely to fill due to the warmer weather late in November and early in December that model guidance is now picking up on.

natural gas commodity weather

Then in a Note last Thursday (11/16) we warned that warmth was likely to still pull us lower from there, something we have seen in forecasts through this week as well.

natural gas commodity weather

These forecasts verified and current 8-14 Day forecasts do not hold much cold risk, as seen by the latest 12z GFS ensemble forecast below (courtesy of the Penn State E-Wall).

natural gas commodity weather

Accordingly, we saw the front of the natural gas strip lag, and over both the past day and week we have seen H/J come in and prices pull back consistently.

natural gas commodity weather

Today's decline was furthered by weak cash prices ahead of the holiday weekend and warmer short-term forecasts, something that we warned clients in our Afternoon Update yesterday could be a bearish drag on the market today.

natural gas commodity weather

Now, traders will sit back and watch the market digest the latest model guidance on thin electronic trading over the next 36 hours before we should see some volume come in on Friday. Long-range models continue to show a volatile pattern, however, so we expect a number of weather-driven moves to come.

With that, we at Bespoke Weather Services wish all of you a very Happy Thanksgiving, and hope that you truly enjoy the long weekend! Due to the holiday we will not be posting any more free content, so we look forward to updating you again come Monday.

And of course, in the meantime if you find yourself looking into the natural gas market or doing some research, feel free to try out a 10-day free trial to our services and see our latest analysis on how weather forecasts will likely move natural gas prices over the coming couple of weeks. Our latest Afternoon Update just shifted our sentiment into the holiday weekend, so you'll definitely want to give it a look before diving back into the market Friday.




The Front of The Natural Gas Strip Keeps Deteriorating

Tuesday, November 21, 2017 at 4:15PM


Another trading day, another down day for prompt month natural gas. That is now 6 out of the last 7 trading days that have seen losses for the December natural gas contract, and yet even with further losses today we have not entirely closed the gap below.

natural gas commodity weather

The continued trend recently has been losses almost entirely at the front of the natural gas strip as weather has offered gradually less support. The result is that in the past week, the March 2018 contract is down almost 9 cents, with the April 2018 contract down less than a cent.

natural gas commodity weather

Shown another way, the March/April H/J spread is back to annual lows even as prompt month prices are significantly above where they were the last time H/J was at these levels.

natural gas commodity weather

In our Morning Update published around 8 AM EST every morning, we not only provide our latest 15-day GWDD and 4-week EIA forecasts but also provide a technical analysis of the natural gas market and look out 18 months along the strip. This morning, those looking at our 7-12 month future contract screener would see contracts that are bouncing off support and seem to be remaining relatively stable.

natural gas commodity weather

That is a much different story than prompt month natural gas, where weather is a key short-term driver.

natural gas commodity weather

Luckily for natural gas bulls, cash prices have been relatively firm this past week, limiting losses near the front of the strip and keeping the prompt month contract from selling off further in comparison to the rest of the winter strip.

natural gas commodity weather

It is this type of analysis down the natural gas strip that we use to determine the role of weather in recent natural gas price action, and clearly the role has been significant as of late. Even today we saw shifting weather model guidance whipsaw prices yet again, as it is clear that heating demand expectations are in charge. For clients today we issued our Weekly Seasonal Report, which goes through our 5-month seasonal forecast to analyze which way GWDDs are likely to trend each month and see which natural gas contracts or spreads would accordingly appear mis-priced. To give this report a look, and begin receiving all of our other natural gas and weather-driven analysis, try out a 10-day free trial.




Natural Gas Stumbles Out of the Gate Again

Monday, November 20, 2017 at 4:07PM


December contract natural gas prices are now down five out of the last six trading sessions as cold to end November and bring in December has been rather unimpressive. We continue to watch the gap below that bulls have thus far been able to defend, but a new short-term low today seemed to put it further in danger.

natural gas commodity weather

Yet while forward weather expectations pulled down natural gas futures, Henry Hub cash was flat on the day, seeing relatively little interest heading into the holiday-shortened week.

natural gas commodity weather

This cash firmness helped limit losses for the prompt month December contract compared to the rest of the winter strip, albeit barely.

natural gas commodity weather

Yet through the day today it was clear that bearish weather expectations were dragging down prices, as again we saw large losses for the March/April H/J spread, which indicates a decreasing winter premium.

natural gas commodity weather

Weather guidance continues to play the primary role with natural gas price action, and our products are designed to keep clients ahead of the next natural gas move. Today we published our Natural Gas Weekly Update, which is our flagship 14-page report that takes a look at natural gas technicals and fundamentals while weaving in the latest weather-driven analysis. Traders can view content like the page below that provides a technical overview of the market.

natural gas commodity weather

This is provided alongside our latest weather forecasts, which are then used to create our market sentiment. The below GWDD forecast was from this morning's report, with traders clearly seeing that we are expecting weather-driven demand a bit below seasonal averages over the next 15 days (hence the weakness in prices).

natural gas commodity weather

Then this afternoon clients received our Afternoon Update which breaks down the afternoon weather models and expected price action into tomorrow. This always provides a comparison of the latest Climate Prediction Center forecasts as well to show what the natural gas market appears to already be pricing in and expecting.

natural gas commodity weather

The goal here is to ensure that subscribers are kept ahead of every major natural gas price move and know whether it is weather-driven or perhaps something else, be it balance-related, technically-driven, etc. By combining our natural gas and weather analysis seamlessly, traders are able to know exactly what the role of weather appears to be in recent price action, and we can alert them how important upcoming weather model runs will be and how elastic price seems to be to the latest fluctuations in Gas Weighted Degree Day (GWDD) weather-driven demand forecasts. To try out a free trial of our services and put our live analysis and forecasting to work, sign up here




The Natural Gas Gap Continues To Hold

Friday, November 17, 2017 at 4:33PM


The natural gas gap held again today as the December natural gas contract bounced off it and rallied a bit through the day on marginally colder weather forecasts.

natural gas commodity weather

Some of the move was weather-driven, as the front of the strip saw the largest gains and parts of the rally coincided with American modeling guidance, but the rest of the strip did decently today as well.

natural gas commodity weather

Yet warmer weather risks and declines at the front of the natural gas strip have pulled H/J back down significantly, and it was only able to marginally recover today, indicating concerns about stockpile levels moving through the winter remain relatively lower than they were a few months ago.

natural gas commodity weather

However, heading into the day we noted that concerns for the winter were still substantially above average, as only once in the past 6 years has H/J been this wide in the middle of November (and unless weather turns cold it tends to fall off rather quickly from here as well).

natural gas commodity weather

Much of that is due to stockpiles being decently below average as we head into the winter season, which as we mentioned yesterday makes the market extremely sensitive to weather changes. Yet long-range weather model volatility is extraordinarily high as models attempt to discern how much cold lingers along the East Coast. For example, the early morning 6z run of the American GFS ensembles showed widespread warmth with only limited cold risk on the East on December 1st (image courtesy of the Penn State E-wall).

natural gas commodity weather

The early afternoon 12z run showed substantially more cold risk for the same time, boosting natural gas prices.

natural gas commodity weather

It is these kind of run-to-run differences that have been driving much of the natural gas volatility through the week, and are one of the key things we keep an eye on when analyzing the natural gas market. Our market sentiment attempts to analyze both what the market is currently expecting/what has been priced in along with which way weather models are likely to trend and their relative consistency, allowing clients to know which way it appears risks are skewed heading through each trading day. We just issued our Pre-Close Update, where we broke down expected risks through the weekend and into early next week for the natural gas market. Feel free to check out the Update bysetting up a free trial here.




Mind The Gap: Natural Gas Bulls Continue To Defend Last Week's Gap

Thursday, November 16, 2017 at 4:14PM


For a second straight day December contract natural gas prices bounced off support around the $3.05 level but were unable to break lower and fill the gap below.

natural gas commodity weather

This price action fit nicely with our Daily Morning Text Alert sent out to Trader level subscribers before 7 AM EST which breaks down our sentiment and a key trading level to watch for the day.

natural gas commodity weather

The critical word ended up being "maybe," as though we did test that $3.05 level a number of times today it was able to remain firm. In fact, prices were able to bounce a bit off it into the settle as well, led by later contracts along the natural gas strip.

natural gas commodity weather

We see clearly there how weather depressed the front of the natural gas strip there, but a rather supportive EIA data print seemed to prop up later contracts. The EIA announced a natural gas implied flow of -18 bcf for the week ending November 10th, which was just a bit off from our -14 bcf estimate. Yet this 4 bcf bullish miss was still the most bullish miss from our estimates in almost two months (the September 28th data release for the week ending the 22nd was 5 bcf bullish to our estimate).

natural gas commodity weather

Bulls point to natural gas stockpiles that are now moving further below the 5-year average.

natural gas commodity weather

Bears point to record production levels that sit significantly above year-ago levels (as seen below in today's Natural Gas Weekly Report from the EIA).

natural gas commodity weather

At the end of the day, though, it will be the weather that determines where prices head over the coming weeks or months, and that is what we are watching most closely. Large differences remain between American and European modeling guidance, and long-range forecasts remain quite volatile. In today's Afternoon Premium Update we broke down weather's expected impact on the natural gas market and where we see prices heading into the end of the week. To give the report a look, and to begin receiving those Morning Text Alerts that keep you ahead of the day's natural gas price action, try out a free trial.




Volatile Long-Range Weather Models Continue To Whipsaw Natural Gas

Wednesday, November 15, 2017 at 4:26PM


December natural gas prices went for a ride today, bouncing off resistance just below $3.16 and selling heavily into support below around the $3.05 level. We saw a bullish run of the American GFS operational guidance with a major medium-range cold shot help push prices into resistance, but when the model's own ensemble members did not confirm its output prices were quick to sell off.

natural gas commodity weather

This sell-off was not surprising to our clients, who received a Morning Note just ahead of the GFS warning that the natural gas strip did not appear especially conducive to any rally furthering. Instead, we settled with the largest losses along the winter strip, with the February and March 2018 contracts coming in as the largest losers.

natural gas commodity weather

Despite being up much of the day, then, H8/J8 closed lower on the day as the major cold shown by the GFS was not confirmed by other guidance, and concerns about a weather-driven demand spike next week eased.

natural gas commodity weather

That being said, there will be some lingering cold risks across the East even into the long-range that will help keep heating demand at least close to average. The 12z American GEFS shows decent cold risks on Monday, November 27th, though they gradually ease from there (image courtesy of the Penn State Electronic Wall map site).

natural gas commodity weather

We picked up on these mixed risks well, as in part of our Morning Update we effectively captured the range that natural gas prices would trade in through the day.

natural gas commodity weather

Now we head into tomorrow's EIA data lingering near one support level with volatile weather forecasts. Over the past couple months we have seen natural gas EIA data rather consistently hitting expectations; eventually that will break down and we could see the same type of volatility from an EIA print that we have seen from the release of a weather model. Yet until then it appears we have enough weather-driven volatility to go around anyways.

To view our estimate for the EIA print tomorrow alongside all our other reports, including our natural gas technical analysis, market commentary, and GWDD forecasts, sign up for a 10-day free trial.