Friday, March 16, 2018 at 4:37PM
It was another snooze-fest in the natural gas market today, with prices ticking weakly higher within a very narrow trading range. Prices ticked a bit higher after the settle too, expanding the daily range, but it still sits as the smallest of the year at just 3.4 cents. This was not a surprise to subscribers, as in our Afternoon Update yesterday we forecast that support would hold with a more supportive strip and if anything prices would wonder higher towards resistance. Prices did not quite complete that trek up, falling a cent short, but prices continually bounced off a lower support level through the day, trading within the generally expected very narrow range. Today was a bit different in that through much of the day the prompt month April contract seemed like it wanted to rally but was held back by later contracts. The result was a day where the April contract actually logged the most gains. This makes sense when looking at the latest weather forecasts. Our final weekend forecast attached in our Pre-Close Update increased heating demand expectations later in March. This came even as the Climate Prediction Center slightly decreased them in the 8-14 Day time period. In our Note of the Day today for clients we explained where the main uncertainties were in model guidance heading into the afternoon 12z runs. Sure enough, some of those uncertainties were resolved, and our afternoon GWDD forecast was raised. The front of the natural gas strip ticked up higher as well. In our Pre-Close Update, published every Friday before Globex close, we break down the latest weather model trends and provide our expected weather forecast for Friday, explaining how that skews risk heading into the weekend and could drive natural gas prices early next week. In it we take our current GWDD forecast and are able to adjust it based on how models have been performing, assigning it a confidence level and then looking out at other factors from spread movement to power burn and balance data to assess weather's relative importance, concluding with a weekend sentiment. To give that report a look and begin seeing all our other natural gas-driven research, try out a 10-day free trial here.
Thursday, March 15, 2018 at 5:43PM
It was another EIA Thursday today, and unlike last week the print this week was at least able to spark some volatility, with prices settling down 1.8% on the day. The EIA announced that 93 bcf of gas had been pulled from storage last week versus our estimate of 98 bcf, disappointing a market that had been looking for a more impressive (and maybe even triple-digit) draw. The result was a withdrawal that was just slightly smaller than the 5-year average. Yet even though the print missed, when looking back at the last 10 gas weeks it was not exactly loose. Still, the miss was enough to pull the whole strip lower. The April/October J/V spread fell to new lows. Losses even extended out through cal 19 and into F-J 20, though beyond there we saw some gains. As always, immediately after the print today we broke it down for clients and put it in historical context, explaining how it shifted our reading of natural gas balance. Then in our Afternoon Update we look over the latest weather model forecasts and trends, providing our updated 15-Day GWDD forecast and weaving that in with our reading of natural gas spreads and the latest EIA data. To give the report a look and see how we are able to best determine risks in the natural gas market using our custom weather forecasts to see how and when weather drives prices, try out a 10-day free trial here.
Wednesday, March 14, 2018 at 5:14PM
As we move through March, we continue to see market attention turn away from weather and more towards other supply/demand balance factors as heating demand fades away. That was not totally the case today, with prices pulling back on warmer overnight forecasts today. Our Morning Update alerted of rather significant overnight GWDD losses. And before that our Early Morning Text Message alerted that $2.72 support was likely to be tested, which prices moved just a cent below through the trading session today. Weather clearly played a large role in the decline, with J/K moving down sizably today. Yet weather was not the only thing we were monitoring today. In our Note of the Day for clients we noticed that nuclear outages had ticked up the last few days and were now over year-ago levels as we move into maintenance season. Meanwhile, traders are of course focused on an EIA print tomorrow that will shed more light on current balance. We similarly outlined our expectation for the print and its potential impacts in our reports today, accurately predicting as well that support would hold today and the back of the natural gas strip would lead us higher into the settle. It's this blended approach that we feel give subscribers a unique edge, as we are able to look out along the natural gas strip and compare price action against both our latest weather forecasts and other indications of balance to determine how risk is skewed and prices likely to react. This becomes especially important around EIA prints like tomorrow, when volatility increases and we release our EIA Rapid Release Report to subscribers with our latest reading of market balance. To ensure you don't miss out on that report, and begin receiving all our other weather and natural gas-driven analysis, try out a 10-day free trial here.
Tuesday, March 13, 2018 at 5:09PM
Natural gas prices were relatively stable today, eventually settling up modestly on a day where they traded positive through most of the trading session. The theme of small trading ranges continued, with just a 3.5-cent trading range again today. This pulled the daily trading range far below what we tend to see this time of year. The natural gas strip settled with relatively similar gains along the strip, though backs rallied into the settle so they ended up leading. In our Afternoon Update we looked at recent intraday spread action as well to determine risk and a market narrative, as we have seen spreads be especially telling as of late. A dominant theme in recent trading has been colder trends through the remainder of March that seem likely to pull storage levels even further into the end of the season. In our Seasonal Trader Report, where we outline our 5-month GWDD forecasts and look at the latest seasonal forecasts, we project our end of draw storage levels for subscribers. These have been falling the past week, as our 4-week withdrawal estimates have increased. Our estimate for the Thursday data print was confirmed by Dominion's (DTI) weekly storage change announced Monday, which lines up well with a sizable withdrawal across the East. The withdrawal at Dominion was the largest since the week ending February 8th. Not only that, but we see strong evidence that the EIA print to be announced next week could show a larger withdrawal than the last (as we expect to see a few more GWDDs in Gas Week 11 than Gas Week 10). Of course, the natural gas strip has already accounted for some this, as we showed in our strip analysis for clients in our Seasonal Trader Report today. For now, traders will continue watching to see how close to 1.3 trillion cubic feet (tcf) national natural gas storage levels can fall, and position accordingly based on current balance to ensure storage levels are filled enough to withstand the next winther. Weather thus will continue to play at least some role in the short-term as traders adjust expectations for how much gas we walk out of withdrawal season with, and we expect spreads to continue signaling market expectations and catalysts well. We will accordingly keep using spreads in our daily reports to break down price risks and expected price movements in conjuction with our detailed weather forecasts (especially in our intraday Notes Of The Day, which look at spreads most closely); try out a 10-day free trial here to give these a look!
Monday, March 12, 2018 at 5:32PM
April natural gas prices were finally able to get moving today, registering their largest percentage daily move since February 20th as prices moved 1.7% higher on colder weekend forecast revisions. This was a textbook weather-driven move, with the front of the natural gas strip leading prices higher. Seen another way, increased weather-driven demand clearly moved out the April/May J/K spread, which hit its highest level in over a month. This fit with our expectations, and early this morning in our Early Morning Text Message alert we warned clients that $2.8-$2.82 resistance was likely to get tested on these weekend changes. Sure enough prices rose right up into that resistance level, pulling back just slightly through the afternoon. Yet when looking out even further along the natural gas strip we can see how front-led the rally was, with later contracts not participating much at all today. The Climate Prediction Center picked up on these weekend and overnight cold trends as well with a far colder 6-10 Day outlook than they had yesterday. Though March tends not to bring nearly the type of heating demand that January and February can bring, it still can make a sizable dent in storage levels, and today it clearly drove prices. Meanwhile, traders will continue to keep an eye on storage across the Pacific region, which is the one EIA region where storage levels are outside the 5-year range. We broke this down for subscribers today in our Natural Gas Weekly Update, where we take a close look at all aspects of the natural gas market from balance and storage levels to strip performance, technical movement, and of course current weather forecasts and expected forecast trends. To give this report a look, as well as all our other natural gas-driven analysis, commentary, and data, try out a 10-day free trial here and see how we can help you navigate the spring shoulder season with detailed risk analysis.
Friday, March 09, 2018 at 4:32PM
The volatility continues to be sucked out of the natural gas market, as we had by far our slowest trading day of the year. Prices traded in a narrow 3.2-cent range into the settle, bouncing off the $2.72 support level last night and holding right above it through the trading day today. Post-settle they have now dipped just below it on a bit of volume, though, as traders position for the weekend close. In our Morning Update out around 7:45 AM Eastern to clients, we highlighted both that we expected a very tight trading range today and that $2.72 support was likely to hold into the settle despite a few bearish overnight trends. Each of these ended up verifying well overall. We continue to see later contracts get bid up a bit more into the settle. The result is a day where again X8 and Z8 saw the smallest declines among the 2018 natural gas contracts. This also pulled J/V back near recent lows. Support held today even as afternoon GFS ensemble guidance increased warm risks across the center of the country. That said, mid-March was always supposed to be relatively warm. Our Note of the Day from last Thursday highlighted the fact that the pattern was always supposed to trend warmer into the middle of the month which would limit upside above the $2.75. That was exactly what we saw through the week. Yet while mid-March does see some of these warmer trends, traders are similarly eyeing cold risks later in March. The CFSv2 American climate model continues to show Week 3 cold risks, as shown below. Traders next week will have to weigh forecasts of both warmth and cold in different time frames, as well as the expected impact of a larger withdrawal to be reported by the EIA on Thursday. Of course, weather tends to gradually matter less as we move through March and into April, when heating demand falls off, meaning reading balance and spread signaling become that much more important to determine price risk. We combine all of this in our daily reports for clients, allowing us to maintain a high level of accuracy through the shoulder season even when weather's role in driving price action at times dwindles. To take a look at our Pre-Close Update, which outlines our expectations for next week, and begin receiving all our other detailed natural gas-driven research, try out a 10-day free trial here.
Thursday, March 08, 2018 at 4:32PM
Natural gas prices settled down three quarters of a percent today, again not seeing all that large of a trading range but trading outside the even tighter range of yesterday. The result was another tick lower in the average prompt month daily trading range, which sits below 5 cents for the first time in at least the past 6 months. While some had hoped that today's EIA withdrawal announcement would induce volatility, the print showing a net implied flow of -57 bcf last week fell right within most expectations, not moving the market significantly. While we had expected a slightly tighter print of -62 bcf, this certainly fell within what we saw as possible too, and accordingly prices moved very little upon its release. The number fit broadly with past data from previous weeks as well. Into the settle then we saw the most weakness at the front of the strip, like we observed yesterday. The result was a pretty noticeable tick lower in the April/October J/V spread. Meanwhile, V/F recently pulled back from new highs. Subscribers were made aware that prices could pull back quite early today, as we sent out our Morning Update when prices were flat on the day and noted a loss of 6 GWDDs overnight. This came after we noted that weather appeared to be playing a role in price action along the natural gas strip yesterday, too, potentially helping explain why prices pulled back today. Into the weekend then traders will be looking for how forecasts for the end of March could shift and impact how much gas we walk out of withdrawal season with, as well as what next week's far larger EIA withdrawal will look like. We recently published our Afternoon Update where we broke down afternoon weather model guidance, provided an updated 15-Day GWDD forecast, and analyzed the natural gas strip to see where risk appears skewed into the weekend. Try out a 10-day free trial here to give that report and all our other research a look!
Wednesday, March 07, 2018 at 5:28PM
Natural gas prices continued their grind upwards today as late March kept trending colder, rallying another percent. Through much of the day the prompt month March contract led, though it dipped a bit into the settle with the rest of the strip remaining firm. Yet even with back-to-back days of prices moving more than a percent, the daily ranges remain significantly below average levels. Even in past years where prices were lower we saw larger daily trading ranges, as instead trading has recently been rather one-directional. These trends come even as weather model guidance increases forward weather-driven demand expectations. Our afternoon GWDD forecast for clients bumped expectations up by around 10 GWDDs through the next 15 days, putting weather-driven demand solidly above seasonal averages for March. As can be seen, American GEFS guidance trended significantly colder in its afternoon run for Days 8-14 in what was one of the larger mid-day model adjustments in awhile (image courtesy of the Penn State E-Wall). Still, the steady grind higher in natural gas prices continues with the average daily trading range only ticking lower. Tomorrow traders have the weekly natural gas inventory change print from the EIA to inject a bit more volatility into the market. Each week we provide a rapid release report immediately following the data release, and we release 4-week estimates of the data daily to help traders estimate gas flows in and out of storage and position accordingly. These are updated in tandem with our GWDD forecasts and fit in with our natural gas supply/demand modeling to determine current market balance, all of which make up our weather-driven natural gas sentiment. To receive this rapid release report tomorrow and take a look at all our weather-driven natural gas research, try out a 10-day free trial here.
Tuesday, March 06, 2018 at 5:29PM
After a period of very slow trading, the prompt month natural gas contract finally had its largest daily change since February 20th, with prices rising 1.7% on the day. Prices moved right into the $2.75 level that we had been warning clients would likely be tested for quite awhile. Back on February 27th we said we saw limited upside to the $2.75 level but expected a tight balance to have us test it. This level even got a mention all the way back on February 21st as the first resistance level prices should work their way up towards on March cold. Our Morning Text Message Alert to clients warned that this may finally be the day that the $2.75 resistance level got tested too. On the way up the entire strip participated, but for one of the first times of the last couple weeks the prompt month April contract actually led. The result was a decent recovery in the J/K spread. As those Notes from a couple weeks ago predicted, it was March cold that appeared at least partially responsible for this recovery in prices. As seen below, American GEFS guidance trended back colder in the 8-14 Day time frame this afternoon, keeping heating demand close to average (courtesy of the Penn State E-Wall). This cold is expected to keep natural gas stockpiles decently below the 5-year average through the next 4 weeks, as shown in the below chart to subscribers in our Seasonal Trader Report. This Report, published in the middle of the week, outlines our 5-month GWDD forecast and looks out along the natural gas strip for opportunities to capitalize on potential mispricings of forward weather expectations. The Report accurately predicted cold risks later in December and provided traders a number of opportunities to capitalize on cold lingering through January as well. Today took a look through the shoulder season to when the first cooling demand could arrive, providing ideas on how traders may begin to position for that. To give this report a look, and begin receiving all our other detailed research including twice daily GWDD forecasts, weather model and pattern discussions, and natural gas balance and strip analysis, try out a 10-day free trial here.
Monday, March 05, 2018 at 5:04PM
Yet again April natural gas prices traded within a very narrow range of just 5.3 cents today, settling up a third of a percent after a modest gap up last evening. Prices initially gapped up on modest GWDD additions in the medium-range, like we had warned in our Pre-Close Update on Friday. Sure enough, our 6-10 and 8-14 Day GWDD forecasts today were very close to our Friday expectations, as we helped clients prepare in advance for minor weekend forecast adjustments. It became clear weather was still playing at least some role in price action when prices initially dipped off a warmer run of the American GEFS before recovering back into the end of the day (images per Penn State E-Wall). Along with these forecast trends, traders are eying what should be a rather limited withdrawal to be announced on Thursday. The withdrawal looks to be the smallest since Gas Week 49 of 2017, when we saw 69 bcf of gas withdrawn from storage. Columbia Gas Transmission (TCO) announced today their smallest weekly draw from storage so far in 2018. Combined, TCO and Dominion (DTI) had their cumulative smallest draw of the season as well. This makes it likely that the East Region as a whole will also feature a smaller withdrawal than it has thus far in 2018 too. For those keeping an eye on the weather, this should not be much of a surprise given the amount of warmth across the East last week. Still, the print should provide further insight into current supply/demand market balance and lingering sensitivity to weather. Last week we used our analysis to get the print exactly right at -78 bcf, and will continue to provide subscribers with our latest EIA estimates daily. In our Weekly Natural Gas Report today, which is our flagship report on all aspects of the natural gas market, we broke down how we see balance currently skewing price risk and how regional storage differences could influence natural gas prices through the week. To give this report a look and begin receiving all our other detailed weather and natural gas-driven research, try out a 10-day free trial here.
Friday, March 02, 2018 at 4:35PM
The official February heating demand prints are in, and they demonstrate a month that once again brought below average heating demand. This February was the coldest of the last three years, though following last winter's record warmth that is certainly not saying much. The final number came in at 726 Gas Weighted Degree Days (our blend of Utility Gas Weighted Heating Degree Days and Population Weighted Cooling Degree Days). This ended up being outside the range in our final Pre-Winter Seasonal Trader Report forecast from October 31st, though we had accurately listed the risk as warmer for the month. Per NOAA, we see that the month was significantly warmer across the East with cold focused back across the Great Plains. This matches rather well with the standard Jan/Feb/Mar La Nina risks, and though the pattern did not always develop classic La Nina characteristics through the month the end result had a clear La Nina signature. February this year was record breaking in at least one way, however. Warmth across the Southeast was impressive enough that we set a record for most Population Weighted Cooling Degree Days (PWCDDs) for the month. Of course, this was far from enough to make up for the heating demand losses seen across the East, and natural gas prices sold off very significantly through the month accordingly. It didn't help that natural gas dry production set another record in February. Now into March attention begins turning to the next major weather-driven demand season: summer. Per the Climate Prediction Center we are most likely to see ENSO-neutral conditions this summer, with La Nina conditions being slightly more likely than El Nino conditions. However, the "Spring Barrier" (where models struggle to determine ENSO state changes and adjustments through the Spring) keeps confidence low. Certainly that is something longer-term natural gas traders will be keeping an eye on as we move through the spring shoulder season, with still a bit of late-season heating demand showing up in the next few weeks as well. For more on our seasonal forecasts, our Seasonal Trader Report published every week breaks down the latest changes in seasonal pattern drivers and creates 5-month GWDD forecasts, indicating how we expect them to impact prices along the natural gas strip. This is just one example of how we combine medium and long-term weather forecasts with other fundamental and technical analysis of the natural gas market to identify risks all along the strip. Try out a 10-day free trial to give all this research a look!
Thursday, March 01, 2018 at 5:22PM
March natural gas prices settled up a bit more than a percent on the day following an EIA print that came in right at expectations. The EIA announced a net implied flow of -78 bcf, which was a withdrawal significantly larger than for the same week last year but much smaller than the 5-year average. This fit perfectly with our expectations, though this confirmation we saw as slightly bullish, which we notified our clients of immediately following the print. Prices then dipped a bit initially after but rose into the afternoon. By the end of the day, though, it was clear the print was supporting prices, with the entire natural gas strip up solidly. The data release was also able to induce enough volatility briefly that the 5 and 10-day average trading ranges both ticked higher, though not by all that much. Looking closer into today's release, while much of the country withdrew gas last week, salt caverns across the South actually injected gas back. This comes after Salts were significantly depleted in the heart of winter, when cold dove significantly into the South. Of course, storage levels nationally still remain significantly below the 5-year average, though they closed the deficit again with today's print. Tomorrow traders will undoubtedly continue weighing the latest balance and storage expectations against forward weather expectations for the month of March, which we have continued tracking for clients. Our Morning Update showed a tick up in 4 GWDDs from our Afternoon Update yesterday, which certainly provided some support for prices through the day today too. Yet recently it has been our reading of natural gas balance that has helped us accurately predict grind higher. To begin receiving our reports that integrate natural gas fundamental supply/demand balance readings with the latest weather forecasts/analysis, try out a 10-day free trial here.
Wednesday, February 28, 2018 at 4:38PM
With March beginning tomorrow, the Climate Prediction Center issued their final forecast for the month. Generally, it shows warmth in South and Northeast with cold in the Great Plains and Pacific Northwest. This certainly shares strong similarities with the final February run of the American CFSv2 climate model, per NOAA. This would make it look like heating demand expectations through the month of March are relatively close to average. They also indicate that the second half of the month is likely warmer than the first, with the Climate Prediction Center updated 8-14 Day forecast still having decent cold nationwide. Early on in the winter we had been expecting heating demand expectations to be lower than average, with our October 31st Seasonal Trader Report calling for decently below average heating demand through the month. That changed as we began to see increasing cold risks increasing early in the month of March. Back on February 12th (when the April natural gas contract bottomed) we sent out a Note of the Day warning that a bottom was likely in as a -NAO atmospheric block would increase cold risks to end February. Even our GWDD breakdown from our Morning Update this morning favored heating demand a bit above average through the next two weeks, in line with that CPC forecast. Yet as we outlined for clients last week, upside would be limited as the cold appeared unlikely to be particularly lasting. The result is that over the past week the April/May J8/K8 spread is actually down a tad, even as the prompt contract (and the April contract) have both remained firm. The trend continued today, with smallest losses along the natural gas strip actually coming with the summer contracts. As we head into the EIA data tomorrow, then, traders will continue to weigh what looks to be a cold start and mild end to March against whatever balance the data reveals. In our Afternoon Update for clients today we recapped recent weather model trends and how they changed our expectations for the coming few weeks of weather, as well as where we see EIA data and current balance sitting and how that should drive natural gas prices moving forward. To begin receiving all our detailed weather and natural gas-driven analysis, pokeweather.com/subscribe/new">try out a 10-day free trial here.
Tuesday, February 27, 2018 at 5:06PM
The April natural gas contract took over as the prompt month contract today, and despite early morning declines prices were able to bounce through the day and pulled back only slightly into the settle. Prices initially bounced just above the $2.62 level we had been watching this morning. After that test, though, we saw a back-led rally mid-morning, with the prompt month April contract actually continuing to lag into the settle. The result was a sizable tick lower in the J/K spread despite a firm prompt month. In this morning's Morning Update for clients we described this dynamic in advance. Weather was a bit less impressive today, leading J/K to tick in, yet we continued to see tightness in the natural gas market that kept our sentiment from turning bearish in the decline, and we just instead saw limited upside above the $2.7 level the April contract bounced off. We also made note of it in our Seasonal Trader Report, where we looked at how the natural gas strip differed from the last time the April contract traded at similar levels back on December 18th. This report provides both a 5-month GWDD forecast and seasonal forecast analysis, and combines that with our understanding of the natural gas strip and latest balance dynamics, allowing us to identify opportunities all along the strip. It also builds off of our Notes of the Day, like our Note from last Friday which alerted that we saw the tight balance continuing. The focus on balance likely continues into tomorrow as well as traders position for Thursday's EIA print. Already Dominion (DTI) has announced a modest-sized withdrawal of 10 bcf for the week ending February 22nd. This has us expecting a modest withdrawal from the East Region, even though other regions may not see withdrawals that are all that large due to relatively widespread warmth. Generally, last week was quite mild per the NWS, explaining why the withdrawal to be announced will be below the 5-year average. Still, cold across the Great Plains is worth watching due to limited stockpiles in the Mountain Region. Here, though, we show how we can combine our understanding of natural gas balance and spreads with our custom weather forecasts. All our reports look holistically at the natural gas market, weighing various catalysts while similarly explaining how weather models and forecasts are likely to change, allowing us to accurate determine the role of weather and the potential magnitude of price changes that the weather could drive. Take a look at these reports for yourself with a 10-day free trial and see how you can put our integrated weather and nat gas research to use.
Monday, February 26, 2018 at 4:57PM
Upon becoming the prompt month contract, the March natural gas contract violently reversed in its first two days, selling off heavily the ensuing two weeks. Yet on its expiry, it was much more tranquil; prices traded in a more narrow 9.4-cent day range today and settled only half a percent above where they did Friday. The March natural gas contract saw what amounted to a real crush of volatility. The average prompt month trading range plummeted. The prompt month daily trading range, while being exciting to start February, has now fallen to the bottom of the historical range. This came as H/J flipped into contango, with H/J expiring right in the middle of the past few years. Today's H/J decline came as much from gains with the April contract, which led the strip, as it did from March weakness into expiry. Much of this was thanks to another tick higher in medium and long-range cold risks on model guidance, as seen in today's afternoon Climate Prediction Center update. This is exactly what we warned clients in our Friday Pre-Close Update, where we expected model guidance to be more bullish to start this week than it was to end last week. This verified the Slightly Bullish sentiment we had for clients in our Pre-Close Update overall as well. Such sentiment carried over into today. Our intraday Note of the Day was published mid-morning after natural gas prices declined from the overnight rally. We saw cash weakness as primarily responsible for the decline, and in a number of updates had warned clients that afternoon model guidance today was likely to add some heating demand back. Sure enough, that occurred this afternoon, and prices were able to rally off their mid-morning lows. This cash weakness is something we had been warning clients about since last week as well, as significant warmth across the country early this week will limit heating demand before the early March cold arrives. With the April natural gas contract taking over as prompt at a decent premium it is clear that the natural gas market has already priced in some of the colder trends for March. The question is now how strong this cold will be, how much has been priced in, and how much gas will accordingly be pulled from storage as traders try and estimate at what price we will be able to re-fill stockpiles for next winter. Weather sensitivity is expected to remain elevated, making our Morning, Mid-Day, and Afternoon Updates all that much more important for natural gas traders. Try out a 10-day free trial here to give them all a look and see how we can help you navigate the natural gas market.
Friday, February 23, 2018 at 4:46PM
Natural gas traders awoke to a market that was trading significantly lower as overnight weather model guidance decreased demand significantly. When we sent out our Morning Text Alert to subscribers prices were down a full 2.8%, though we noted downside from there was limited. Afternoon model guidance turned a bit more supportive, however, and prices rallied into option expiry, settling down just slightly on the day but not nearly as much as they could've. The March natural gas contract lagged significantly through much of the day, but rallied the most into settle, actually leading the day at the end. Prices settled right around the $2.62 level that we had alerted subscribers to watch for in our Morning Update. At that point natural gas prices were still down 2.3% on the day. Thanks to the rally into the settle, the entire strip settled up on the week, with the largest gains at the front of the strip. Over the last month, though, we have still seen significant losses as we erased any winter premium. Natural gas prices the last two weeks have found a hard floor, and as we explained to subscribers we see that coming from recent market tightness. This tightness has come despite limited nuclear plant outages, which are down significantly year-over-year. This was a focus in our intraday Note today to subscribers explaining why yet again we expected support to hold. The weekly gain did confirm our weekly slightly bullish sentiment from Tuesday as well. Next week will bring further complications with the March contract expiry, however. Headed into the Monday expiry we note that the H/J spread is above all but two of the last 6 years, with history providing only mixed signals as to how the spread tends to act into expiry. Of course, stockpiles below the 5-year average will continue to play a role, and though we project the difference to average closing over the next four weeks it does not look to significantly. The result should be a bit of weather sensitivity in prices remaining for the April contract next week. We are perfectly poised to take advantage of those opportunities, regularly watching both the current natural gas balance and the latest weather trends to know how risk is skewed and how weather guidance is most likely to trend. In our Pre-Close Update we take a look at how we expect GWDDs to trend over the weekend, having accurately called the medium-range losses but long-range additions last weekend that supported prices early on. To give that report a look, and poke around all our other weather-driven natural gas research, try out a 10-day free trial here.
Thursday, February 22, 2018 at 5:07PM
Natural gas prices traded within a very tight range again today, bouncing initially after today's EIA print but declining from there into the settle. Despite the print that seemed to hit expectations, and if anything missed a bit bullish, the March natural gas contract declined by far the most on the day. The result was a pretty significant tick back lower in the H/J spread today. Though today's withdrawal was a bit larger than average, it was still smaller than the 5-year average. It also fit well within the cluster of prints we have seen over the past 10 gas weeks as well. The withdrawal was just 4 bcf from our estimate sent to subscribers today, with it missing on the slightly bullish side, but despite an initial spike in the seconds after the number it was largely sold into. In our EIA Data Rapid Release today we outlined how the print impacted our reading of current market supply/demand balance and put it within historical context. One thing traders will be watching into the March contract option expiration tomorrow will be the March/April H/J spread, which as mentioned took that anomalous dip today. The spread remains above a number of past years (including last year) though we note stockpiles this year are below average with weather turning more supportive in early March. This modestly more supportive weather can be seen on the Climate Prediction Center forecast that has turned a bit colder in the 8-14 Day time frame. After some very limited volatility recently we can expect to see a bit more action with options expiry tomorrow and then the March contract expiry on Monday. In our Afternoon Update we outlined our latest expectations for both weather trends and natural gas price action into the weekend, highlighting where we see risk moving forward. To give the report a look, and begin receiving all our other weather-driven natural gas research, try out a 10-day free trial.
Wednesday, February 21, 2018 at 4:48PM
It was a volatile overnight session for natural gas prices, as some warmer risks in the medium-term on European guidance sent prices lower. They were able to quickly V-bottom off cold risks at the end of the run, however, and prices continued to rally through the day today. As would be expected with this weather-driven rally gains were most significant at the front of the strip, even as front contracts again pulled back a bit into the settle. This has helped the March/April H/J spread recover slightly, moving 2.1 cents off its lows from last week. The overnight dip in prices was impressive but did not surprise, as we had been watching for model volatility and increased price sensitivity to weather. Our Note of the Day to clients yesterday focused on expected short-term model volatility and how to potentially position for it, and prices today moved within 2 cents of the short-term range we had been watching for. These colder forecasts in early March have been driven by a very significant stratospheric warming event, where the stratospheric vortex over the North Pole was perturbed and eventually split. The result was that stratospheric temperatures across the northernmost portions of the Northern Hemisphere rose dramatically and have recently set new records for the time of year, as seen below per NOAA. The relevant downstream impact for the United States is an expected drop in the North Atlantic Oscillation, as seen on yesterday's run of the GFS ensembles per the Climate Prediction Center. The below Climate Prediction Center graphic shows more precisely what is expected to occur. A typical "Positive NAO" pattern in January features a large upper level low pressure system across southern Greenland with resulting higher heights from the Eastern United States across the Atlantic Ocean into Europe, favoring warmth across the region with a strong, active jet. In a "Negative NAO" the pattern holds the opposite; a large upper level high pressure center builds in across Greenland, sometimes referred to a "block" as it blocks the jet stream and directs colder air down and around it. As a result of this block, Europe has recently turned far colder, and the United States looks to follow into early March. At the surface, this can best be seen on the afternoon 12z GFS ensemble surface temperature anomaly forecast for March 1st-7th. As can be seen, significant warmth will build in across southern Greenland and the Canadian Maritimes as the -NAO block strengthens, and as a result cold air from the Great Plains is directed in across the rest of the country (image courtesy of the Penn State E-Wall). We warned clients about this all the way back on February 12th, as seen in the title of our Note of the Day that day. Now attention turns both to overnight weather model guidance, which will show how long any block is likely to last and just how cold it may get, and to the EIA print tomorrow, which should show whether last week's tight print was a fluke or has more backing. We covered all this in our Note of the Day and Afternoon Update for clients, explaining how we see the natural gas market reacting to the latest data and how models may trend from here. To give these reports a look and view all our other research, try out a 10-day free trial here.
Tuesday, February 20, 2018 at 4:58PM
After a slow, steady grind lower in natural gas prices the last two weeks we finally saw an introduction of colder risks in the long-term weather forecasts that helped pick prices back up today. Despite some selling into the settle, the entire strip logged gains on the day. The result is a 10-month strip that looks quite similar to what we saw two months ago before significant cold in January drove prices higher, though H/J has since gone into contango. These colder long-range trends were not much of a surprise to subscribers, as in our Friday Pre-Close Update we warned of warm medium-term trends and cold long-term trends. In our Note of the Day to clients today we showed how these trends ended up verifying well, as heating demand should lag over the coming week and a half before it gets elevated into the first week of March. This confirmed our text message alert to subscribers yesterday that upside would arrive for natural gas prices this week off the cold. The Climate Prediction Center has been picking up on some of these colder trends in the long-range as well. Before the CPC updated we published our holiday-delayed Weekly Natural Gas Update, which called in part for the further cold trends they confirmed. The report contains sections outlining natural gas storage dynamics/balance, current weather expectations, expected weather model trends, expected seasonal forecast trends, and our latest natural gas technical analysis. Below is one slide from our technical section, where we look at seasonality, physical prices, and the broader energy complex. This is our flagship report that covers all aspects of the natural gas market, and clearly laid out our natural gas sentiment for the upcoming trading week. To give the report a look and begin receiving all our other weather-driven natural gas analysis, try out a 10-day free trial here.