BWS Blog


Weather Fakes Out Natural Gas Traders

Tuesday, October 17, 2017 at 3:20PM


Natural gas prices continue to be predominantly driven by weather, which we saw again today as afternoon weather model guidance heavily reversed prices. We have seen weather models seem to drive price action within a broad range the last two days as prices have attempted (and failed) to break out both upwards and downwards.

natural gas commodity weather

This comes as we have been watching to see if cold arriving in the medium-range will have much staying power into the long-range. Our Afternoon discussion yesterday to clients highlighted why we saw prices likely remaining within a general range from $2.88/$2.92-$3.02 today, which they did as they bounced off $3.02 resistance and sold back down towards $2.92 support later today.

natural gas commodity weather

Our Note yesterday morning highlighted the risk that weather model guidance would trend warmer in the long-range, like we saw today. There is evidence that the Madden/Julian Oscillation will continue driving weather patterns over the next few weeks, and we see that opening up warmer risks following the colder risks over the next week or two.

natural gas commodity weather

The key, though, is that traders need to keep a very close eye on the latest weather model guidance. We noted that in our Morning Update discussion released at 8 AM EDT, when we explained the higher likelihood that natural gas prices would sell off this afternoon following GFS and GEFS guidance that has been more bearish the last couple of days compared to the European ECMWF.

natural gas commodity weather

The verification of these market analyses shows just how weather-driven a market we are in right now as the natural gas market is hunting for the first sign of any sustained cold. Prices were able to rally significantly last week on the risk that cold could stick around into November, but now some modeling guidance is showing that the cold will not be all that sustained into November. The result is that November prices have reversed heavily on the day and sit back near support, as they are pricing in less of a weather premium over recently weak cash prices.

natural gas commodity weather

Undoubtedly, the natural gas market will continue to react (and sometimes over-react) to the latest weather modeling guidance, and the hunt is now on for when the next cold shot becomes likely. To know which way the models are likely to trend and when the next price movement in natural gas is likely to come, sign up for a 10-day free trial and see how our weather-driven natural gas market analysis can keep you ahead of this short-term volatility.




Weather In The Driver's Seat

Friday, October 13, 2017 at 4:07PM


It should be clear to all participants in the natural gas futures market that weather is significantly driving price action. Much of the rally in prices this week can be attributed to the addition of heating demand expectations in the long-range forecast, as far colder weather is expected across the country to close out Friday. The result is that prices closed up just less than 5% on the week.

natural gas commodity weather

To our subscribers, this move was not much of a surprise. On Tuesday, as the late-month pattern shift was first becoming apparent, we sent out a research Note explaining why long-range forecasts should actually be trusted despite mixed historical verification rates.

natural gas commodity weather

This early lead time allowed us to alert our subscribers that our hypothetical portfolio was going long later in the day on Tuesday, allowing us to capture our largest gains of the year off of this weather-driven move. Now today we see long-range weather forecasts showing a significant amount of colder weather at the surface, with the latest 12z GFS ensembles favoring cold focused across the Southeast on Day 15 (October 28th).

natural gas commodity weather

The natural gas market priced this in by elevating the front of the strip the most through the week, as though expectations of limited storage injections or early storage withdrawals supported the whole strip we clearly saw the front come away with the largest weekly gains.

natural gas commodity weather

Yet one can also see that today the front of the natural gas strip did not see as many gains as the winter strip. This came even as cash prices rallied today.

natural gas commodity weather

Seen another way, the X/Z spread, after rallying this week, pulled back a bit today, indicating more buying interest for the December contract than the prompt month November contract.

natural gas commodity weather

This comes at a time of the month when weather tends to significantly drive both prompt month natural gas and the X/Z spread into the X7 expiry, as we see from this chart we published yesterday that in the past the X/Z spread has trended heavily in both directions this time of year.

natural gas commodity weather

Though long-range modeling guidance still shows the cold that it has been the last few days, it seems the natural gas market is attempting to judge just how long any cold will stick around and how significantly it should elevate demand. The result, then, is that any forecast shifts over the weekend should have a disproportionate impact on price action into next week.

We just recently published our Pre-Close Update, which analyzes how we expect weather forecasts to shift over the weekend and how we see that influencing natural gas prices come Sunday evening. This is just one of many of our reports which combine detailed meteorological analysis with other technical and fundamental analysis of the natural gas market to see when and how much weather matters to price action, providing actionable alerts on when best to act upon weather-driven moves. To take a look at our Pre-Close Update and begin receiving all our other research, sign up for a 10-day free trial here




Natural Gas Shakes Off A Large Storage Injection

Thursday, October 12, 2017 at 3:52PM


At 10:30 AM EDT the Energy Information Administration announced that last week we injected 87 bcf of natural gas into storage, coming in slightly above our 85 bcf injection forecast and above most other analysts who were clustered a bit lower. This indicates some week-over-week loosening in the natural gas market.

natural gas commodity weather

Yet natural gas prices seemed to shake this off, closing significantly higher on the day and above the 30-DMA for the first time in October.

natural gas commodity weather

Again today the reason seemed to be the weather. Our Morning Text Alert and then Morning Update both highlighted slightly bullish sentiment with risk skewed upward, and that was confirmed even after the large storage injection was announced. We can clearly see that it was weather driving price action along the strip by the prompt month isolation we saw in today's rally.

natural gas commodity weather

This came even as Henry Hub cash prices pulled back slightly on the day, indicating the rally was not cash-led but prompt-led as end of month heating demand expectations increased.

natural gas commodity weather

This all fits within our current understanding of the natural gas supply/demand balance, and our Afternoon Premium Update issued just a bit ago outlines how we expect weather to drive natural gas price action further as we head into the weekend. To give that report a look and to view all our other analysis on how weather is driving the natural gas market, sign up for a 10-day free trial.




Scales Matter: Does Natural Gas Or Oil Seem Undervalued?

Wednesday, October 11, 2017 at 3:52PM


Every morning in our Morning Update for clients we pass along a quick screen of important long-term spreads in the natural gas market as well as comparisons of natural gas to crude and heating oil prices. This page (seen below) comes alongside our morning weather forecast, natural gas technical analysis, and a look at the front 18 contracts along the natural gas strip.

natural gas commodity weather

After today's price action, where natural gas prices reversed to settle near flat on the day and oil prices continued higher, it seemed like divergence between natural gas and crude prices grew.

natural gas commodity weather

The same can be said for heating oil.

natural gas commodity weather

Yet it would appear much of this just depends on the timescale. Divergence over the past year definitely seems to have increased. Yet when looking at a chart of the past 5 years, it would seem that natural gas prices are finally falling back to the exact levels where they would be fairly valued against crude.

natural gas commodity weather

Much thus depends on the timescale that you are looking at. On a short-term basis, there certainly seems to be divergence between oil and natural gas, but the longer-term picture would seem to indicate that such divergence is inconsequential.

To begin receiving our Daily Morning Update that includes these energy commodity comparison and spread analyses, as well as all our other content including detailed weather forecasts, natural gas trade alerts and idea generators, early morning text alerts, and detailed technical analysis, try out a free trial.




Natural Gas Finds Its Footing

Tuesday, October 10, 2017 at 4:03PM


After three straight down days, and down days 7 out of the last 8 trading days, natural gas prices rallied over 2% today for the largest prompt month contract rally since September 18th.

natural gas commodity weather

Of note today as well was that the H8/J8 spread widened for the first trading day since September 27th, as concerns arose again that market tightness and stockpiles right around the 5-year average could lead to a gas shortage with a colder winter. Still, though, H/J remains significantly below where it was previously trading, as traders do not seem to expect that any cold will be sustained enough to shrink gas stockpiles towards dangerous levels into March 2018.

natural gas commodity weather

On the day, we saw the front of the natural gas curve produce the most gains, a reversal from recent trading days where backs had been gradually adding support. Instead, fairly strong cash prices and speculation around long-term cold to end October added support to the front of the strip.

natural gas commodity weather

Bulls found hope on long-range modeling guidance that began to show pieces of a weather pattern that were more indicative of cold risks to close out the month. We noticed this after the overnight runs, and our Trader level subscribers received a text before 7 AM EDT this morning warning that weather would likely support prices a bit more today.

natural gas commodity weather

Yet not all guidance is showing these risks just yet. Yesterday's runs of the American CFSv2 climate model when broken down on a weekly basis has not shown many cold risks at all through the end of October.

natural gas commodity weather

This is at odds both with other atmospheric indicators and weather models that show an increasing risk for at least some cold moving into the end of the month. As an example, on Day 15 the American GFS ensembles when averaged together show heat lingering in the East but cold weather displacing that heat across the center of the country.

natural gas commodity weather

Yet as we explained to subscribers in a Note today, that may not be telling the whole story. There is a risk that a shift in the pattern could be coming to end October with significant ramifications for the natural gas market as heating demand expectations could be greatly altered, but any shift still appears at least a couple weeks away, with risks that weather pushes natural gas prices in both directions in the coming weeks. It is clear, though, that weather is getting increasingly important to the natural gas market as we can see it driving price action on a daily basis. To view our latest recent reports on what we expect for the end of the month, as well as our analysis on where we see natural gas prices as most likely headed, sign up for a 10-day free trial here and see how we can keep you ahead of weather-driven fluctuations in the natural gas market.




Natural Gas Prices Fall Again on Bearish Weather

Monday, October 09, 2017 at 4:22PM


Mid-October warmth remains a key focus of natural gas traders as they try and judge just how much heating demand will be reduced. We saw prices today attempt to recover some of their losses from last week hitting $2.88 support-turned-resistance before gradually selling off through the day and closing near the lows.

natural gas commodity weather

With recent heat across the country, we have been seeing stronger cash prices with impressive power burns. Cash prices declined slightly today in line with the prompt pullback, but their recent strength appears due in part to these burns and to lingering production shut-ins from Nate in the Gulf of Mexico. On the demand side, meanwhile, it will take a bit longer to just see how much demand was lost via power outages from Nate.

natural gas commodity weather

Today we published our flagship Weekly Natural Gas Update, which is the most comprehensive report we issue on weather and the natural gas market. In it, we outlined both recent market tightness and the expected impact of weather on the supply/demand balance through the month of October. Of note for regional traders was the recent deficit in gas continuing across the Pacific which is unlikely to ease in the face of cold weather across the Pacific Northwest.

natural gas commodity weather

Recent American GEFS guidance for October 21st shows how only the Pacific Northwest has any real cold risks in the medium-range, with heat widespread in the center of the country.

natural gas commodity weather

The question still remains just how long this warmth will linger through October and if much of it will spill over into November. That remains a key focus of ours, and one that we expect to drive natural gas price action over the coming few weeks. Sign up for a 10-day free trial here to see our latest thoughts on when a pattern flip will come and how we view the natural gas market as likely to react over the next month.




Weather Conspires Against Natural Gas Prices

Friday, October 06, 2017 at 4:09PM


It was a rough week for natural gas bulls, as prompt month prices slid lower four of five days and settled today below a key support level that we had been watching all week.

natural gas commodity weather

This came even as the Energy Information Administration confirmed that the supply/demand balance in the market is incredibly tight, with one of the smallest October gas injections into storage being reported. Over the past six years this was the smallest injection to be announced for Gas Week 39, and was also the tightest on a weather-adjusted basis.

natural gas commodity weather

The result is that total gas stockpiles have fallen below the 5-year average for the first time since January, setting us up with a supply shortage ahead of the winter heating demand season.

natural gas commodity weather

Yet prices were entirely unfazed, reversing off of their intraday highs following the data to close down yesterday before accelerating lower today. Much of this appears due to our specialty: the weather. Recent forecasts by the Climate Prediction Center, which we organize every day for our subscribers, show that even though forecasts were warm before, cold risks are clearly easing even further through October.

natural gas commodity weather

This is something we had been watching all week and alerting subscribers to, as bearish weather expectations have certainly depressed prices in the face of structural tightness. Even now, the most recent run of the American GFS ensembles in the 8-14 Day time frame seems to show a bit more warm than cold risk, though it is cooler than previous runs in this time frame (and at the end of the run trends warmer again).

natural gas commodity weather

Not only this, but Tropical Storm Nate looks likely to make landfall along coastal Louisiana, which is one of the largest natural gas demand regions this time of year. Though the path will certainly impact some oil and gas rigs, the below path will also have demand implications.

natural gas commodity weather

Yesterday we published a detailed Note on this to subscribers explaining why we saw Nate as either neutral to net slightly bearish depending on the exact track, but that regardless it would not significantly drive natural gas prices (and certainly not be bullish like the 2005 hurricanes were).

natural gas commodity weather

Today we followed up with another Note on the updated track and implications of Nate for the natural gas market headed into the weekend, which you can view with a free trial here.

Overall, though, it is clear that weather is holding the natural gas market back, as October is looking to be quite warm. While late-season cooling demand will be elevated, it is heating demand losses that will truly become the main story. Traders will be eyeing the return of the first true cold weather this winter, which is our focus as well. To ensure you don't miss the arrival of the first winter blast and the ensuing natural gas price reaction, try out a 10-day free trial and see how we can keep you ahead of any volatile national weather patterns.




Nate Forecast Shifts Slightly West

Thursday, October 05, 2017 at 3:11PM


We now have Tropical Storm Nate that is moving over Central America before heading back out over open waters. The National Hurricane Center forecasts Nate to move very close to (or potentially over) the Yucatan Peninsula before sliding into the Gulf of Mexico and potentially strengthening to a weak Category 1 hurricane.

natural gas commodity weather

The National Hurricane Center also has increasing confidence that at least tropical storm force winds are likely headed towards southeastern Louisiana as well as potentially Missisppi, Alabama, and the Florida panhandle.

natural gas commodity weather

It is worth noting that landfall is expected in the US in 60-72 hours, as the storm is expected to be moving rather quickly. There is also a relatively small spread in model guidance at this time, as there is clear steering flow that should direct the storm through the Gulf of Mexico. The result is a clear consensus that the storm makes landfall around coastal Louisiana per the American GEFS (imagine courtesy of weathernerds.org).

natural gas commodity weather

The European ECMWF ensembles overnight trended west and are more similar to the American GFS ensembles, as the European guidance apparently previously mishandled another weaker system moving off of Florida.

natural gas commodity weather

For now, the National Hurricane Center does remain slightly on the eastern side of the model consensus, so they could tweak their forecast slightly further west, but they are certainly within the model range with only minor tweaking likely to be done for the track forecast from here.

natural gas commodity weather

The intensity remains a bit more complicated, however. Some models still show the storm being able to achieve weak hurricane status, while other models show the storm maxing out as a strong tropical storm (image courtesy of Tropical Tidbits).

natural gas commodity weather

Much depends on whether the storm interacts with the Yucatan Peninsula and the exact track. Should it move over land it will weaken right when we would expect it to be getting more organized, and could struggle to re-organize into the Gulf of Mexico. Additionally, on the east end of the track sits water with higher oceanic heat content that could supply energy to Nate should it pass over that area. Should Nate move further west, it could miss that warmth.

natural gas commodity weather

The result is that the expected track has a small amount of uncertainty (that grows after landfall) but that the intensity has a bit more uncertainty, as the specific track will be very important for judging intensity. We note that limited oceanic heat content and potentially some lingering upper level shear do cap upside for the storm likely at a Category 1 hurricane, so at least it should not rapidly intensify like other storms we have seen this season.

Meanwhile, the natural gas market clearly appeared uninterested in the tropics today, rallying off a bullish EIA print before reversing and selling into the close, all while staying within a tight trading range.

natural gas commodity weather

In today's Note of the Day for subscribers we took a deeper dive into Nate's forecast and expected impacts across the energy sector as we head into the weekend. To give that report a look, as well as to see our daily weather and natural gas-oriented analysis, sign up for a free trial.




Tropical Depression 16 Forms, Threatening The Gulf Coast

Wednesday, October 04, 2017 at 3:05PM


Tropical Depression 16 has officially formed and appears very likely to develop into Tropical Storm Nate. The National Hurricane Center currently has the storm achieving weak hurricane status before making landfall around the Florida panhandle.

natural gas commodity weather

As of now, it appears most likely that any tropical storm force winds would approach the Gulf Coast late Saturday night into Sunday morning.

natural gas commodity weather

As can be seen below, the National Hurricane Center currently sits on the eastern edge of most tropical models, which favor the storm moving closer to Louisiana.

natural gas commodity weather

Instead, we see that the National Hurricane Center appears to be relying on the reliable European ECMWF ensembles, which are further east than most other guidance (courtesy of weathernerds.org).

natural gas commodity weather

The storm is almost certain to become a Tropical Storm, though it is unclear if its intensity peaks as a strong tropical storm or a weak hurricane. Model guidance is currently split on this (image courtesy of Tropical Tidbits).

natural gas commodity weather

As we mentioned previously, ocean heat content in the western Caribbean is quite high, which favors development into a tropical storm over the next couple of days. After that, though, conditions look to become at least a bit less favorable, so rapid intensification through the Gulf of Mexico appears unlikely at this time.

natural gas commodity weather

Still, some guidance does show the system (soon to be Nate) gaining more strength before landfall, as it is unclear just how much wind shear there will be in its path as it moves into the Gulf of Mexico. There is quite a bit of shear there now, but there are indications that it should gradually be easing over the next few days.

natural gas commodity weather

Regardless, those along the Gulf Coast need to watch this closely. With landfall still over 3 days away, there is a fair amount of uncertainty around how quickly the storm can intensify and exactly where it will track. Should it trend on the western side of its track, it could also hit the Yucatan Peninsula which would weaken it rather significantly before it attempts to re-strengthen in the Gulf of Mexico, certainly sparing the US the worst. Yet despite these uncertainties, confidence is still quite high that there will be at least some US impacts from the storm given its forecast track.

We have been monitoring the potential impacts to the energy markets, and our Note of the Day highlighted what we expected those impacts to be to the natural gas market, along as what factors could change our current forecast. To view that Note along with all our other content, try out a free trial here.




Watching The Tropics Yet Again

Tuesday, October 03, 2017 at 3:08PM


Eyes are turning back to the tropics, where there is yet another disturbance worth tracking at this time. Though the National Hurricane Center has highlighted two regions of note, the one circled in orange has a 60% chance of developing into a tropical system over the next 5 days and thus is being watched most closely.

natural gas commodity weather

The American GFS ensembles develop this system into a tropical storm over the next few days and move it towards the Gulf Coast (courtesy of Tropical Tidbits).

natural gas commodity weather

Other modeling guidance is similar, as it is the Gulf Coast that it is the area that needs to keep watch. The most recent run of the European model shows the storm approaching weak hurricane status before landfall as well (again courtesy of Tropical Tidbits).

natural gas commodity weather

We note a significant amount of Oceanic Heat Content (OHC) along the forward path of the invest (in the southwestern Caribbean) explaining why we see it as an increasingly likelihood that this storm develops.

natural gas commodity weather

Wind shear across that same region is also rather limited, meaning there will be room for intensification over the coming days.

natural gas commodity weather

Of course, before a disturbance has completely formed we can expect a large model spread and decent run-to-run variations, especially in operational guidance. Yet one trend is that there does appear to be somewhat of an upward limit for strength, as most modeling guidance does not yet show the storm develop past at most a Category 1 hurricane, since there is currently a significant amount of wind shear across the northern Gulf of Mexico. Regardless, the environment is favorable for this storm to develop over the next few days, so residents along the Gulf Coast should continue to monitor this very closely.

Meanwhile, we will be tracking the impacts of any potential storm development on the energy impacts, including storm analysis in our frequent market and weather forecasts. Just today we published our Seasonal Trader Report, which is updated every Tuesday with our 5-month forecast for weather-driven energy demand and pricing along the natural gas strip. To give this report a look, as well as the Afternoon Report due out shortly that will contain our impact analysis of this tropical system, sign up for a 10-day free trial here.




Weak Cash Prices Pull The Natural Gas Strip Lower

Monday, October 02, 2017 at 3:19PM


On our blog on Friday, we explained why natural gas trading today was likely going to be exciting and how the natural gas strip was giving us a bearish red flag. Well, that red flag verified, with the November contract plummeting 3%.

natural gas commodity weather

Physical gas prices were extraordinarily weak today, with Henry Hub cash weakness pulling down the whole natural gas strip.

natural gas commodity weather

This can clearly be seen with today's prompt month isolation, as the prompt contract saw by far the largest losses with further back contracts not moving nearly as much.

natural gas commodity weather

X/Z clearly widened significantly as well.

natural gas commodity weather

Overall, it became clear that physical balances over the weekend were loosed than expected, and today we saw the market correct accordingly. With prices right near support, however, we expect weather and in-week balances to significantly drive prices, and a tight EIA print can be expected on Thursday.

We had a research Note out today on how we expect cash to drive prices over the next couple of weeks, and also published our flagship Weekly Natural Gas Update providing detailed commentary on all fundamental and technical aspects of the natural gas market. To give this report a look sign up for a free trial here.




A Natural Gas Red Flag

Friday, September 29, 2017 at 3:15PM


Natural gas prices settled slightly down on the day after some heavy selling into the settle. The result was a week where the November natural gas contract was little changed, reversing mid-week.

natural gas commodity weather

The selling into the settle did not surprise, however, as we noted through the entire day that the natural gas strip was lagging. Though the winter contracts led us higher mid-day, much of the 2018 strip was lower through the day, and settled with even more significant losses than we saw at the front. On a weekly basis, too, only the winter contracts saw any gains.

natural gas commodity weather

The natural gas market is thus still clearly concerned about storage balance heading into the winter, and the market is tight. However, bearish medium-range weather expectations have taken their toll, as we expect very mild weather across the country next week to kill natural gas demand. As a result, the prompt month November contract has been lagging significantly against December contract.

natural gas commodity weather

This is not without historical precedent, either, as we have seen this spread widen dramatically in years with very warm Octobers.

natural gas commodity weather

Additionally, already weak Henry Hub cash prices through the week have limited the November contract, and minimal weather-driven demand next week will do little to help.

natural gas commodity weather

Over the past couple of months, we have seen a strong natural gas strip amidst structural tightness support the front of the strip higher, even when weather appeared quite bearish at times. Today, however, that supportive strip was no longer there. Later contracts declined and seemed to hold the front of the strip back. Market tightness can only do so much, as this time of year weather begins to increasingly matter as heating loads increase. In the context of lagging backs, natural gas bulls need help more now than ever from the weather, otherwise we could see X/Z widen even further.

Over the weekend, we will see our first burst of heating demand as well with seasonal temperatures. We expect scrapes and demand estimates to tell what the market balance is come Monday when we do not have large late-season cooling loads, like we have seen this week. Throw in this added attention that we now have to the weather with lagging backs, and we can expect an exciting Monday.

In our Friday Pre-Close Update, due out in the next half hour, we will outline for our subscribers what weather shifts we expect over the weekend and what risks we see to our current natural gas sentiment. To give the report a look, and see how we blend our weather forecasts with natural gas technical analysis, sign up for a free trial and see how we can keep you informed about the natural gas market from all angles.




Natural Gas Prices Fall With A New Prompt Contract Yet Again

Thursday, September 28, 2017 at 3:29PM


Despite a rather bullish EIA print this afternoon that showed we injected only 58 bcf of natural gas into storage last week, prices still sold off today, the day after the October contract went off the board and we rolled to the November contract.

natural gas commodity weather

This reversal came as a surprise to many, but not our subscribers. Yesterday our Daily Note focused on a pattern we had noticed around contract expiration each month, and this month we followed it yet again.

natural gas commodity weather

We saw this again today, as cash prices actually dipped a bit in the face of bearish weather expectations into next week, helping limit upward potential near the front of the strip.

natural gas commodity weather

Our subscribers were prepared for this price action, even though it was a bit counter-intuitive to the EIA reaction. Each day our Note of the Day picks up on a technical or weather-driven feature that catches our eye and we think will be of special importance to those keeping a close eye on the natural gas market. To begin receiving the Note of the Day, try out a free trial here and see how we can combine weather and technical analysis to keep you ahead of the natural gas market.




October Contract Natural Gas Goes Off The Board With A Jump

Wednesday, September 27, 2017 at 3:05PM


October contract natural gas prices jumped just less than 2% on their final day of trading, moving right off the support level we had been tracking all week.

natural gas commodity weather

To our subscribers this recovery did not come as much of a surprise, as we saw a number of elements come together to push prices higher. A recent trend has been for the strip to rally into a contract expiry (something we have published Notes on). Power burns have been extraordinarily impressive, and we even saw a bit more bullish weather risk on long-range guidance and our atmospheric indicators. Our active subscribers had all this summarized before the market move this morning, when our morning text alert went out to their phones just before 7 AM EDT.

natural gas commodity weather

Then attached in our Morning Update at 8 AM EDT was a chart showing how the April 2018 contract was holding on just above its 30-DMA for support, and that the buying we were seeing along the strip (including for J8) indicated upside through the day.

natural gas commodity weather

Of course, these factors were just a couple pieces of the puzzle. But we had continued to note earlier in the week that medium and long-term weather was acting as a headwind for the market, eliminating a significant amount of heating demand, and just today a bit more long-range cold risk had arrived. This comes ahead of an EIA print that is expected to be quite tight, thanks in part to far warmer weather across much of the East last week elevating cooling demand.

natural gas commodity weather

Our Afternoon Premium Update will be breaking down our expectations for natural gas price action heading into tomorrow's EIA print, looking at changes in weather forecasts through the day and analyzing what the natural gas strip may be signaling. To give it a look, try out a free trial here and see how we can keep you ahead of weather-driven moves in the natural gas market.




A Winter-Led Nat Gas Bump Into The Settle

Tuesday, September 26, 2017 at 4:13PM


Yet again today natural gas prices traded within a tight range, moving very little. On a technical basis, we have seen prices sitting right near support, which was still not broken today even with the October contract options expiry.

natural gas commodity weather

October contract prices remain below all major moving averages heading into the expiry tomorrow, and actually sit just below Henry Hub cash prices as well.

natural gas commodity weather

Yet on this very slow day, one thing we did take note of was that there was a small rally in prices into the options expiry settle. Of particular interest was the fact that this rally was winter-led, albeit small, so that it was the winter strip that closed up the most on the day.

natural gas commodity weather

Not only that, but into the end of the day we did see latter portions of the strip perk up as well, with a number of key spreads flat on the day.

natural gas commodity weather

Given the day's lackluster price action, as well as the prompt month weakness and steady selling through the middle of the trading day, it is important not to read too much into this. Still, though, following recent losses bulls can use all the help they can get, and a small winter-led bounce into an options expiry settle certainly is not bearish.

To begin getting our daily reports analyzing natural gas price action and the relative role we see short and longer-term weather forecasts playing on it, try out a free trial here.




Thursday Yields Most Telling Natural Gas EIA Print In a Month

Monday, September 25, 2017 at 4:47PM


Natural gas prices were unable to sustain a weak early morning rally, instead reversing through the day and settling near the lows on the day to print out an ugly candle.

natural gas commodity weather

Bearish weather forecast revisions over the weekend likely played a role in this reversal, which we warned clients about this morning as we saw less heating demand through the first half of October. Our Daily Note broke that down, where we explained how a stronger La Nina signal heading into October has been complicating the forecast. One piece of this Note demonstrated how a negative Oceanic Nino Index (a measure of La Nina conditions) typically leads to less weather-driven demand in October.

natural gas commodity weather

Yet that is far from the only thing we are watching. Part of the reason natural gas prices are trading back in a lower range is because of a bearish EIA print last week that followed a previous bearish print as well. Over the past few weeks we can see how the natural gas market has clearly loosened on a weather-adjusted basis.

natural gas commodity weather

Yet we have been cautioning subscribers against reading too much into these prints. Though there is no arguing that stockpiles are larger now than most expected them to be a month and a half ago, this is thanks in part to exogenous factors as opposed to simple market loosening. The loose print three weeks ago in part reflected demand reductions from Harvey including both decreased power demand from cooler weather/power outages and Mexican export disruptions. The print two weeks ago included demand reductions from the Labor Day holiday weekend, and this last print included Florida demand decreases from Irma-associated power outages. Finally this week, we will see a print that includes elevated GWDDs and no exogenous demand shocks.

natural gas commodity weather

The result, then, is that traders will be watching the number very closely, and we could see above average volatility around it. Additionally, a miss in either direction in the print could have a large reaction on short-term prices; a bearish miss would confirm we cannot blame recent loosening on storms and that power burns are not as tight as they seem, while a bullish miss would confirm that much of the previous loosening was from these previous factors and that though there is more gas in storage than expected, flows are still limited.

To view our current estimate for the EIA print due out on Thursday, as well as our daily Notes on natural gas market price action and our twice daily natural gas-focused weather forecasts, sign up for a free trial here.




Natural Gas and Oil Complex Diverge

Friday, September 22, 2017 at 2:30PM


One thing we track at Bespoke Weather is how the often weather-driven price of natural gas is acting in comparison to other commodities in the energy complex. One part of a Note this morning to clients looked at the recent divergence between natural gas and crude oil/oil products. Yesterday we saw natural gas prices sell off hard but oil prices remained steady, actually ticking up a bit on the day.

natural gas commodity weather

Granted, on a longer-term chart this looks a bit less impressive, especially given the volatility in natural gas (and the longer-term chart almost makes this recent move look like convergence), but it is clear that recently they have been moving in opposite directions.

natural gas commodity weather

Yet what we found more interesting was the recent divergence between heating oil and natural gas, both of which are primarily heating fuels.

natural gas commodity weather

These two tend to correlate a bit better, though the recent Harvey-inspired heating oil supply shortage seems responsible for the most recent diverging leg. Even still, since Harvey we have seen heating oil prices continue higher over the past couple of weeks while natural gas prices attempted to rally but reversed hard yesterday. This is just one more piece of the puzzle to keep an eye on in the energy complex.

To view today's Note that looks at recent price action among energy complexes, as well as our afternoon Update analyzing expected weather forecast changes over the weekend and all other research, try out free a trial here.




Natural Gas Prices Break Down as Cash Remains Strong

Thursday, September 21, 2017 at 4:23PM


Natural gas prices plummeted today following a bearish EIA print showing that for the week ending September 15th we injected 97 bcf of gas into storage.

natural gas commodity weather

This crashed natural gas prices over 4.5% on the day and back through the 30 and 60-DMAs. Prices are still above their pre-Irma levels, when traders were rushing to price in just how much demand would be lost across Florida, but the spike on Monday has been canceled out as prices are now far lower on the week.

natural gas commodity weather

Despite the prompt month contract selling off this bearish EIA print, significant heat today and over the next few days kept cash bid rather significantly in comparison.

natural gas commodity weather

The result is that we ended the day with some of the most significant cash backwardation that we have seen in the past 6 months.

natural gas commodity weather

Forecasts are far cooler as we move through next week, which will pull weather-driven demand back significantly, but it is clear that the market is pricing in a significant cash pullback and that strong cash prices are no longer providing the support that they were earlier in the week.

In our Afternoon Premium Update today, we ran through what all this means in terms of future expected price action, as well as how weather forecasts may influence prices headed into early October and why reading into this week's EIA print too much may be a bit dangerous. To view this report, along with all our other research, sign up for a free trial.




Natural Gas Pulls Back But Sees Later Contracts Support

Wednesday, September 20, 2017 at 2:55PM


October natural gas prices settled down just less than 1% today, trading within a narrow 5.8-cent range following an even tighter range yesterday. Despite the pullback, prices are sitting right near resistance-turned-support following Monday's seeming break upwards.

natural gas commodity weather

Yet despite the pullback yesterday into today, the 2018 natural gas strip has remained quite strong, as has been the case for the last couple of months. We made note of that this morning in our Morning Update, where we both noted that winter isolation in the morning's rally made it likely to fail (as it did) and that structural support for the market is continued by long interest later in the strip. Included in the daily report is a look at a number of contracts later in the natural gas strip to keep traders up to date heading into the trading day.

natural gas commodity weather

Viewed another way, we continue to see the 2018 and 2019 natural gas strips as quite strong, which appears to have supported the front of the strip as well.

natural gas commodity weather

This has come alongside recent strength in oil prices and the rest of the energy sector as well.

natural gas commodity weather

It appeared, then, that all that was needed for this recent rally was a catalyst for cash prices to rally and pull the front of the strip up, which near-term heat appears to have provided.

natural gas commodity weather

We now head into the weekly EIA data tomorrow sitting right near support with strong cash prices and a supportive strip. Our Afternoon Premium Update due out in about an hour will outline our expectations for how the market will react to the data, and what this supportive strip spells for prices moving into the end of September. To view this report, along with all others, sign up for a free trial here.




Hurricane Maria Threatens Puerto Rico While East Coast Watches Closely

Tuesday, September 19, 2017 at 1:48PM


Hurricane Maria achieved Category 5 status last night and remains an extremely dangerous Category 5 hurricane this morning. The latest forecast from the National Hurricane Center puts Puerto Rico directly in the line of this system.

natural gas commodity weather

From there, most model guidance has the storm turning out to sea. The most recent run of the European ECMWF ensembles almost all had the storm pivot out to sea (per Weathernerds.org).

natural gas commodity weather

A recent run of the American GFS ensembles showed the same, with most ensemble members again favoring a turn to the east that will spare the East Coast of the US from seeing anything more than some large waves.

natural gas commodity weather

Thus for now it looks likely the storm stays far enough out to sea to limit any impacts to the continental United States, but it still needs to be watched closely. Tropical forecasts outside of 5 days in advance tend to be very low confidence, and should the position of Jose vary dramatically from current forecasts over the next 120 hours we could see a slightly different steering flow for Maria.

This is something we will be constantly monitoring over the next week, but at least for now the threat appears rather low to the East Coast. This was highlighted in a research Note for clients earlier today as well, which similarly explained energy market impacts resulting from any trends in the track over the next few days. Try a free trial to give the Note a look along with our other detailed content on weather-driven natural gas demand and resulting price action.




Natural Gas Breaks Up As Heating Season Approaches

Monday, September 18, 2017 at 2:21PM


Natural gas prices appear to be breaking upwards today, as prompt month prices are finally above the critical $3.1 resistance level that had proven so difficult to overcome over the past few months.

natural gas commodity weather

The move had been seen in advance by a number of traders, who noted a rounding bottom on the daily chart. Additionally, in the past few months contracts later in the strip had been seeing increasing strength as well, such as the April 2018 contract.

natural gas commodity weather

This move comes with the first real increase in our forecast for Utility Gas Weighted Heating Degree Days, a key component of our Gas Weighted Degree Day (GWDD) weather-driven demand forecasts we publish twice a day. Last Friday in our Pre-Close Update we had noticed an increasing number of signs that weather forecasts in the long-range were likely to trend colder over the weekend, even though most computer models had not yet shown many cooler trends. This Update is published every Friday and estimates what weather-driven demand forecasts will look like come Monday in driving natural gas prices.

natural gas commodity weather

Sure enough, those colder forecasts arrived over the weekend, and weather models began picking up on this colder transition in the pattern. American GFS ensemble guidance from this morning clearly shows the risk for temperatures to be below average from the Ohio River Valley into the Northeast on October 1st, boosting early season heating demand.

natural gas commodity weather

Of course, it is not just these colder trends that helped move natural gas prices higher; this time of year weather forecasts play a far smaller role in driving weekly natural gas demand fluctuations as we are in the seasonal transition between cooling demand and heating demand. In fact, the forecast trend added relatively few GWDDs to our forecast as we lost some Population Weighted Cooling Degree Days (PWCDDs) as well over the weekend. Yet traders are turning their attention increasingly to natural gas as we head into the winter heating demand season and the market remains seasonally tight, with storage levels in most regions right around seasonal averages.


natural gas commodity weather

With storage levels relatively close to the 5-year average and winter closing in, weather forecasts will only matter more over the next couple of months. Sign up for a 10-day free trial now to our paid services and see how we can better help you manage weather-related risk in the natural gas market.