Friday, May 25, 2018 at 5:01PM
The June natural gas contract settled down just a tick on the day but rallied 3.2% over the past week as very hot forecasts across the country over the next two weeks have continually increased demand expectations. As seen in today's updated Climate Prediction Center 6-10 Day forecast, heat across the South remains very high confidence with essentially the entire country looking to be warmer than normal. Expectations of significant heat increasing cooling demand and decreasing the amount of gas injected into storage into early June allowed the entire front of the strip to rally over the past week, with contracts diverging just a bit today into June options expiry. Already natural gas power burns have begun getting elevated for the heat that is building across the country. This comes as nuclear power plant outages continue to run far below average and year-ago levels, limiting the amount of additional gas being burned for power and keeping burns from being quite as high. Preliminary power burn estimates for today still already show burns running far above year ago levels and much closer to 2016 levels thanks to recent heat, regardless of those limited nuke outages. These are expected to be revised a bit higher later as well, as they were yesterday. Every day we measure relative weather-adjusted tightness of power burns, industrial gas demand, and residential/commercial demand to indicate how natural gas price risk is skewed and the relative importance of either Gas Weighted Degree Days (GWDD) increases or decreases. In yesterday's Afternoon Update we noted that we were not particularly impressed by weather-adjusted balances, but saw room for recent hot trends to bring one last small spike in prices like played out this morning before the impact of relatively loose balances and long-range cooler risks could limit the rally. This is generally what played out today, with our neutral sentiment verifying as prices were mostly flat and the October/January V/F spread actually came in exactly flat. Attention into next week now turns to some long-range cool risks as we continue to see the natural gas market be significantly weather-driven. In our recent Pre-Close Update for clients we broke down how we expected models to trend over the holiday weekend as well as what our latest reading of weather-adjusted power burns was and where spreads seem to indicate price risk existed into early next week. This followed up our Note of the Day where we took a closer look at the Week 3 forecast and relative power burns over the last week. To give all these reports a look and see how ahead of significant heat we can help you navigate the natural gas market, try out a 10-day free trial here.
Thursday, May 24, 2018 at 5:05PM
This morning the Energy Information Administration announced that 91 bcf of natural gas was injected into storage last week. This was just 2 bcf from our estimate of 89 bcf after we got the print right on last week. Natural gas prices responded by initially jumping off a print that seemed to confirm slightly stronger power burns last week and a small dip in production. They then settled into a narrow range, settling a few cents higher on the day. Meanwhile, over the past couple of weeks we've been building new models for clients to better show them the relative impact of incremental weather changes on natural gas demand and what balance appears to be outside of weather. Some of these models were included for the first time in our EIA Rapid Release, where we showed how today's print compared on a weather-adjusted basis to past years and how it impacts our storage estimates moving forward, where we combine our reading of forward balance with our seasonal forecasts. These come with new modeling we are building looking to adjust power burns for weather and nuclear generation in an effort to show how tight/loose the market is outside of weather, and accordingly whether GWDD gains or losses to the forecast matter incrementally more for future price action. These models are then combined with some of our spread modeling, providing subscribers with a holistic view of the natural gas market including current/expected weather forecasts, current balance, and price action/risk. Over the coming weeks we look to tweak, update, and build out even more of these models, releasing them to subscribers to both increase our accuracy and further educate about the current state of the natural gas market. Shown above are just a sampling of some of the models that are in the process of being fully rolled out. Our readings of balance will then be increasingly integrated with our latest forecasts, like those this morning that showed relatively minimal overnight trends but slight long-range cooling that seemed to cap upside for natural gas prices today. To begin viewing all the new modeling and put it to use, try out a 10-day free trial here and see how we can better help you identify risks in the natural gas market.
Tuesday, May 22, 2018 at 5:12PM
Weather broke natural gas prices higher today, with the June natural gas contract shooting 3.5% higher on the day after prices settled near our support level again yesterday. In typical weather-driven fashion, the largest gain was at the front of the strip, with the rest of the strip gradually lagging behind the further out you go. As seen in our Morning Update, overnight models added a significant number of Gas Weighted Degree Days (GWDDs), almost entirely in the form of cooling demand from increased heat. This heat was seen as intense enough that in our Morning Text Message Alert we highlighted that $2.87 was likely to be tested today. Then our intraday Note of the Day looked at how a supportive natural gas strip put the $2.9-$2.92 range in play following the break of $2.87 resistance. The June natural gas contract eventually hit a high of $2.917 on the day. Today's weather-driven rally comes following a significant widening of the M/N June/July natural gas spread, which set the table for a sizable rally on GWDD additions. As seen in our Afternoon Update, the Climate Prediction Center picked up on these further hot risks today too in their 8-14 Day forecast. This fits with some of our past forecasts, as we had been targeting June to have a rather significantly hot bias for over a month (as seen in our Seasonal Trader Report from April 16th). After today's weather-driven rally traders will turn increasing attention to Thursday's EIA print, with expectations of a draw somewhere in the mid 80 to mid 90 bcf range. This print will likely confirm whether this rally will continue or prices will begin a retrace. Our Afternoon Update today looked at how spreads reacted through the day and how we expect weather forecasts to adjust into the weekend, integrating that with our latest reading of weather-adjusted power burns to assess price risk headed into the day tomorrow. To give that report a look try out a 10-day free trial here.
Monday, May 21, 2018 at 5:26PM
June natural gas prices declined a bit over a percent on the day, though we noted prices diverging from weather as weather forecasts over the weekend actually trended hotter in the medium-term. The result is that once again GWDDs above average are expected through the next 15 days. Instead, we saw continued looser balances today keep cash prices limited and pressure the front of the strip lower. This is something we had highlighted as a risk to clients last week, as our new weather-adjusted power burn model pointed to loosening burns last Thursday and our natural gas sentiment temporarily turned "slightly bearish." Sure enough, the June contract was the weakest today despite weekend GWDD additions. Yet coming in May, decent weather changes over the weekend can only have a marginal impact at best, and we saw today's trading range remain quite small compared to past late-May ranges. We should again see volatility increasing ahead of Thrusday's EIA print, with the last two prints bringing significant rounds of buying. Already Dominition Transmission (DTI) announced a decently smaller injection than last week, fitting with our projection that this week's injection will be decently smaller than the last. Our 4-week EIA estimates are released in our Morning Update every morning, and are updated in real-time as our GWDD forecasts for each week change as well. They are just one fundamental factor we look at for assessing natural gas price risk, also looking at weather-adjusted demand, expected adjustments in weather forecasts, and price action with natural gas spreads. To put our integrated analysis to use, try out a 10-day free trial here.
Friday, May 18, 2018 at 4:52PM
Natural gas prices looked like they wanted to break higher, with the June contract testing the $2.87 resistance level before reversing into the settle off cooler afternoon weather models. The role of weather was clear, with the June contract logging by far the largest decline on the day as the rest of the strip was solidly more supportive. Our Note of the Day to clients yesterday highlighted why prices could rally into the $2.87 resistance level off widening spreads, but that acknowledged that weather and weakening power burns would make it harder for prices to break higher. Sure enough, it was the cooler trends that then pulled us lower today. Then, our Morning Update and intraday Note both highlighted this trend into the day today, explaining that a strong strip kept $2.87 in play but we expected forecasts to cool this afternoon and pull prices back lower. Disappoint weather did, with afternoon 12z GEFS guidance trending solidly colder in the long-range (image courtesy of the Penn State E-Wall). This led the June/July M/N contract spread to widen even further, moving back closer to the range it was in late in April. The June/October M/V spread took an equally large hit. As we had been outlining to clients the last couple of days, our new power burn model had shown rather significant loosening in power burns, a bearish fundamental factor for a market similarly dealing with GWDD losses. Then today in our Pre-Close Update we broke down recent changes in weather model guidance and explained whether we expected them to continue over the weekend, putting in context today's price action along the natural gas strip and recent trends in our balance modeling. The result was our updated natural gas sentiment headed into the weekend, blending our custom weather forecasts with our latest spread and balance view. To give the report a look, and try out all our detailed natural gas research, sign up for a 10-day free trial here.
Thursday, May 17, 2018 at 5:07PM
After trading solidly lower much of the morning the June natural gas contract stabilized off an in-line EIA print and proceeded to rally through the rest of the day, closing up around a percent and a half at the top of the recent range. Yet today's rally was not prompt-led, but instead led by the second July contract followed up the August contract. The winter strip still lagged on the day, but it was clearly a summer-led rally. The result was even further widening of the M/N June/July natural gas spread. All this came after an EIA print that was not particularly surprising. In fact, it hit our estimate perfectly on the day. Additionally, weather did not appear particularly inspiring for bulls today, with our Morning Update showing only a small tick up in forecast GWDDs through the next 15 days. The in-line EIA print came in solidly above the 5-year average at +106 bcf, which on face value would not be supportive either. However, we are looking for a smaller injection to be announced next Thursday, thanks in part to heat that was quite impressive earlier this week. We have been tracking weather-adjusted burns over the past week with the arrival of heat and alerting subscribers as to how observed burns have jived with our expectations for short-term weather. We continue to track longer-term weather trends as well, using our GWDD expectations to forecast future EIA prints and look at price risk further out in the future. Today in particular we saw a number of signals in balance, weather, and spreads, which we broke down in our Afternoon Update for clients. To give this report a look try out a 10-day free trial here.
Wednesday, May 16, 2018 at 4:45PM
The June natural gas contract continued lower today after its reversal yesterday, settling down a bit less than a percent on the day. Prices yesterday initially moved into our $2.85-$2.87 resistance level before reversing lower and moving back into support. Thus far price action this week has played our exactly as we had spelled out in our Weekly Natural Gas Report from Monday. Today it appeared that slightly cooler forecasts through May played a role in the price move, as we noticed the June/July M/N natural gas spread widen significantly on the day following recent narrowing. Despite forecasts for a warm May, we saw enough heating demand loss in the medium-term and cool risks across the South and Southeast in the long-term for our Morning GWDD Forecast to only hold GWDDs right around seasonal averages. This has come as some weather models have eased off the intensity of heat they show into the end of May, something we explained was a bearish risk back on Monday in that Weekly Update. Even cash prices took a small dip today as expectations for forward cooling demand are not quite as impressive as what we saw over the past weekend. Certainly, weather is not the only factor driving natural gas price action, but thus far this week it seems to have played a role. Meanwhile, we are monitoring production decreases from pipeline maintenance and today issued a Note on weather-adjusted power burns and forward weather expectations explaining where we expect balance to trend moving forward. Tomorrow's EIA print will certainly play a large role, though, as we will send out our EIA Rapid Release immediately following the print showing how tight/loose it is on a weather-adjusted basis and how it appears likely to drive price action into the end of the week. To give all this research a look, try out a 10-day free trial here.
Monday, May 14, 2018 at 4:46PM
The June natural gas contract ground higher yet again today following a supportive EIA print last Thursday and continued warm forecasts for the second half of May. Unlike Friday, today's move was prompt-led as well. This move comes as Gas Weighted Degree Days (GWDDs) are likely to remain a bit above average through the next couple of weeks, as seen in our Morning Update today. Expectations of heat limiting future storage injections has certainly played a role in the recent bid prices have received, as have observations of heat over the last few days that have increased power burns. However, before the heat the last few days we saw very limited weather-driven natural gas demand this past week. The result is an expectation that Thursday the EIA will announce the largest storage injection to date. Already we have seen Dominion Transmission (DTI) announce their largest injection thus far of 10 bcf. As seen in our Weekly Natural Gas Report today, national stockpiles remain far below average currently, making the rate of future injections increasingly important as well. Of course, after Thursday's announced injection we will have to factor in some more of the heat that we are expecting the next couple weeks, which could increase power burns again and limit further injection size. In our Note of the Day and Afternoon Updates today we looked at how forecasts were likely to change over the next couple of days and how that could impact natural gas prices. Additionally, our Weekly Natural Gas Update looked closer at the current storage situation and how it is being priced in along the natural gas curve, updating our weekly sentiment and price expectations. To give all this research a look, try out a 10-day free trial here.
Friday, May 11, 2018 at 5:58PM
Well, it appears we cursed natural gas volatility, as after touting the largest daily range since February 21st yesterday we saw the smallest daily range of the year today. Prices traded just below our $2.82 resistance level through the day, seemingly consolidating after yesterday's large spike. In our Morning Update we explained why we expected a slow day, as typically after a large EIA move prices consolidate into the weekend. A lack of any real day-over-day GWDD changes also helped limit price catalysts. We did see a bit of action along the strip, with later contracts firmer. Yet even so the widening in M/N barely puts a dent in what has been a very impressive narrowing over the past month. We now head into next week with spreads that are a bit wider and prices that have consolidated up at the top of the recent range following a more supportive EIA print and minimal weather changes. In our Pre-Close Update for clients today sent out just before electronic close we took a look at expected weather forecast changes over the weekend as well as what today's spread action says about price risks moving forward and how our reading of balance has shifted through the past week. Our intraday Note of the Day also took a closer look at relative power burn tightness and what that indicates about price risk moving forward as well. To give these reports a look, and begin receiving all our other weather and natural gas-driven research, try out a 10-day free trial here.
Thursday, May 10, 2018 at 4:44PM
After a period of very slow trading, the prompt month natural gas contract saw a trading range of 11.1 cents today, its largest since February 21st. Trading ranges had been historically low recently as the market coiled, with today's move now fitting right in with past years. Prices initially traded lower only to then shoot up on stronger cash prices and then a more supportive EIA print. The entire strip rallied significantly, though gains were clearly largest for the prompt month June contract. The June isolation is best seen in the June/July M/N natural gas spread, which has rallied significantly over the past month and clearly logged another large gain today. The main catalyst today was that supportive announcement from the EIA that we injected only 89 bcf of natural gas into storage last week, as opposed to our estimate of 94 bcf. It was not a major miss, but it came on the lower side of most estimates in a week where many saw risk for a bearish miss. Prices have also been aided by seasonal strength. In our Note of the Day for clients on Monday we highlighted that this week we typically see significant seasonal strength before a mid-May peak, which thus far has played out well. Now that this EIA print has been partially digested, traders are left attempting to decide whether prices moved just into the top of the recent range or whether this represented a breakout. Weather expectations into late May and early June will certainly play a role in determining if any rally has legs, and we are expecting a larger injection to be announced next week. In both our Note of the Day and Afternoon Update today we took a closer look at the EIA print and reaction along the strip, putting those up against our updated reading of balance and expectation of weather forecast changes into the weekend. To give these reports a look, try out a 10-day free trial here.
Wednesday, May 09, 2018 at 4:58PM
The June natural gas contract settled up a few ticks on the day despite the rest of the summer strip being generally flat, as we saw another slow day of natural gas trading. This has certainly been the trend of late, with the June/July M/N natural gas spread increasing significantly despite relatively stable prices at the front of the natural gas strip. Stable cash prices have played a role in this, thanks at least in part to storage operators needing to fill storage levels following significant depletion this past winter. This is seen even more significantly along the whole natural gas strip, where every contract out through 2023 has declined over the past month except the prompt month June contract, which has remained bid up. This is something we have been tracking closely and updating clients on regularly, typically in our daily Note of the Day. These have had high predictive power recently, as our Note from all the way back on the 23rd of April identified $2.8 as a strong resistance level moving forward and explained why we were not convinced by a few bullish EIA prints. These would eventually turn less supportive, as we saw last week. Attention now turns to tomorrow's EIA print and weather expectations later in May when cooling demand finally begins to get a bit more impressive. We analyzed both those in our Afternoon Update for clients today, looking at recent price action and out further along the natural gas curve for indications of what seems to be driving prices. Though volatility is limited right now, once real cooling demand gets going by late May or early June we would expect it to begin returning, with opportunities increasing as well. Before peak cooling demand season gets going, try out a 10-day free trial to our research and see how you can integrate it into your natural gas trading method.
Tuesday, May 08, 2018 at 5:04PM
With a just over a week of May weather in the books, we continue to see added clarity as to how we should end the month and what temperatures for the month as a whole are likely to look like. As seen in recent Climate Prediction Center forecasts from our Afternoon Update, probabilities of warmer than average temperatures across much of the country in the medium and long-range are quite high. This is not all that much of a surprise, as all the way back in our February 13th Seasonal Trader Report we identified a warmer forecast risk in May with lingering La Nina conditions transitioning to ENSO neutral conditions. These warmer trends increased on overnight model guidance last night too, with GWDDs generally remaining closer to average over the next few weeks. The result is that our May GWDD forecast in today's Seasonal Trader Report ticked decently higher. This is impressive primarily because we seasonally see Utility Gas Weighted Heating Degree Days (UGWHDDs) outpace Population Weighted Cooling Degree Days (PWCDDs) through the first two thirds of May, as we showed clients in our Note of the Day back on April 25th. Yet cooling demand may end up being impressive enough to pull GWDDs above average in May, even as heating demand lags. Even recently models have trended warmer, and these trends had us alert subscribers in our Morning Update that June contract support around $2.7-$2.72 should hold through the day, with prices eventually setting a low of the day at $2.706 before recovering into the settle. Of course, May GWDDs still do not tend to be all that significant, and there are a number of other developments we are tracking that are also driving natural gas prices. In our Afternoon Update we put recent short-term model developments in context of our current reading of balance and natural gas spread/flat price movement to update our price expectations for the remainder of the week. To view this Afternoon Update, as well as our Seasonal Trader Report with our 5-month GWDD forecasts and seasonal trade idea generator, try out a 10-day free trial here.
Monday, May 07, 2018 at 4:49PM
After a slow start early this morning, natural gas prices attempted to rally with the June contract leading the whole strip higher from $2.7 to $2.77. The high of the day was set just after 9 AM Eastern on that price spike, however, with the strip gradually pulling down the June contract through the rest of the day. Later contracts clearly dragged down the front through the trading day, with the June contract by far logging the largest gain on the day. The winter strip weakened through the day quite a bit to the point where the October/January V8/F9 spread settled at its most narrow level of the year, even as the June contract settled quite a bit off from its recent highs. Even though the front of the strip attempted this broader rally, it did not appear to be a significantly weather-driven rally, as in our Morning Update we noted some cooler trends from May 15th through the 20th that would limit cooling demand. This generally fit with what we laid out to clients in our Friday Pre-Close Update, though we did not yet add quite as much long-range heat in the final third of May as expected. Our Note of the Day from last Friday for clients caught onto this as well. Today the June contract did dip down to $2.695 before buyers arrived, but from there prices were able to significantly recover and at least temporarily hold that support. Still, traders are awaiting what should be a far larger injection to be reported by the EIA on Thursday. Already, Dominion Transmission has announced a storage injection 2 bcf larger than last week (though 1 bcf smaller than the comparable week last year). In today's Note of the Day and Afternoon Update for clients we took a deeper look into the current balance in the natural gas market and how spreads are helping us see in what way the market is interpreting all the latest data. We also broke down expected weather trends through the week and of course price risk along the natural gas strip, combining our reading of balance, analysis of spreads, and expectations of weather trends to provide a holistic view of the natural gas market. To give these reports a look, and begin receiving all our daily natural gas-driven content, try out a 10-day free trial here.
Thursday, May 03, 2018 at 5:03PM
After three straight bullish EIA prints the last three weeks, today's release missed on the bearish side of expectations as the EIA reported a larger injection of gas into storage last week than expected. The result was a continuation of morning declines in the prompt month June natural gas contract, and though prices weakly recovered into the close they still settled down around a percent on the day. Prices did creep higher this afternoon into the settle, with the prompt month contract recovering the most. The end result was the fall strip generally lagging the most on the day. As a result, the June/July M/N natural gas spread had its most narrow settle since early January despite declines along the strip. This decline fell right in line with expectations, as in our Morning Update on Monday we called for prices to move towards the $2.7-$2.72 level. Then our Afternoon Update yesterday affirmed that prices should move into this $2.7-$2.72 range today, with the June contract bottoming today at exactly the $2.700 tick. Part of the loosening mentioned in the above report summary is driven by nuclear outages, which have ticked down significantly the last few days. Increased nuclear power generation indicates less natural gas burned for power generation, which appears to be one factor that has helped loosen the market over the past week. Today's EIA data sent natural gas prices immediately to the lows of the day, as the EIA announced that last week 62 bcf of natural gas was injected into storage as opposed to our estimate of 52 bcf. We saw this as an implicit revision of the print last week, as last week we were 11 bcf too small on the withdrawal and this week 10 bcf too small on the injection, a net difference of just 1 bcf between the two weeks. Estimates were quite wide with the print due to how many fewer GWDDs comprised the last gas week. Traders now head into the last trading day of the week weighing this recent EIA data with some rather recent weather forecast changes that we have been tracking for subscribers the last couple of days (and which seemed to help move prices today as well). In our Afternoon Update we broke down our latest reading of supply/demand balance and the relative weakness of the fall and winter natural gas strips today to explain where we saw price risk skewed into next week. We similarly expect weather to play an increasingly important role in price action as we move through May, making our weather-driven angle all the more important. To give our latest research a look, try out a 10-day free trial here.
Wednesday, May 02, 2018 at 4:54PM
Just like that, June natural gas prices were right back down today, losing all their gains from yesterday as traders looked for a loosening supply/demand balance into May. After the prompt month contract led the way higher yesterday it led the way lower today, with quite a bit of weakness into the fall as well. The June/July M/N natural gas spread thus did not fall back nearly as much as flat price, as it remains more narrow than the last time prices dipped down to around these levels. This came as weather forecasts continue to be rather unimpressive, with our Morning Update continuing to forecast GWDDs a bit below average through the next 15 days which would struggle to support prices. Today's selling was certainly not a surprise, with our Early Morning Text Message Alert for clients warning of downside on the day. Our Afternoon Update yesterday similarly alerted that any rallies were shorting opportunities, as yesterday's bump proved to be. This comes as year-over-year nuclear outages continue to be incredibly disappointing, with far fewer outages resulting in less natural gas burning than we saw last year. As we mentioned yesterday, after three straight bullish EIA prints all eyes will be on tomorrow's print to see if we can sustain the tighter-than-expected narrative that has propped up the front of the natural gas strip. In our Afternoon Update we broke down our expectations around the print tomorrow and how we see natural gas prices likely to respond, with our Morning Update tomorrow providing our final forecast and our EIA Rapid Release coming out immediately following the print with our latest analysis. To begin receiving all this research, and see how we have helped traders accurately navigate the natural gas market through this shoulder season, try out a 10-day free trial here.
Tuesday, May 01, 2018 at 4:55PM
June natural gas prices rallied a bit less than a percent and a half to kick off the month of May, bouncing off the $2.75 level they settled just above yesterday. The entire strip participated today, as we noticed isolated strength in the November contract as well as with the prompt month June contract. As we showed in our Morning Update, yesterday's price weakness was limited just to the front of the strip, with the prompt month leading a recovery later in the day. This was a trend that continued today as well, with the June/July M/N natural gas spread moving narrower as the prompt month June contract continued to lead the way higher over the rest of the strip. Cash prices found some strength today as well. Today's rally comes ahead of Thursday's EIA print, which is expected to show the first weekly storage injection of the year. As outlined in today's Seasonal Trader Report for subscribers, average weather will result in significant storage builds moving forward, though storage levels will remain significantly below the 5-year average through May. This Thursday's print covers a week where we saw significantly less weather-driven demand, with GWDDs falling quite a bit week-over-week. This explains why we are now expecting a sizable injection into storage to be announced instead of the storage draws we have been seeing recently. Already we have seen reports of storage injections too, with Dominion reporting a 5 bcf injection into storage for the week ending April 26th. Yet even with this weather fall-off, we are currently predicting the upcoming injection to be decently lower than the 5-year average (as seen below in this morning's Morning Update). This has continued to raise concerns that storage will not be filled in time for next winter, which has helped keep natural gas prices bid over the last few weeks. In our Afternoon Update we went through not just this Thursday's EIA print but also what our expectation for EIA data through May likely means for price risk along the natural gas strip moving forward. We also looked closer at spreads to determine short and medium-term price risk and catalysts, and in our Seasonal Trader Report published every Tuesday looked at how our June, July, and August weather forecasts were likely to skew seasonal price risk. To give all this research a look, try out a 10-day free trial here.
Monday, April 30, 2018 at 4:46PM
The June natural gas contract continued its move lower, selling off on cash weakness this morning before recovering some of its losses this afternoon to settle about a third of a percent below Friday's close. Losses were most significant along the fall strip, with the June contract helping pull the winter strip higher into the settle. The result was another tick higher in the June/July M/N contract spread even as the entire strip declined somewhat on the day. Selling early today appeared related to far weaker physical cash prices at Henry Hub. These had helped prop prices up last week and today helped pull them lower. In our Pre-Close Update on Friday we indicated that on a technical basis we saw room for a dip to $2.7-$2.72 early this week but that lower support could hold with a more supportive strip, which is exactly what played out today. Our Morning Update also called for a move towards $2.7-$2.72 while prices were still flat, though prices admittedly only got to $2.728 before reversing in the afternoon. In our Afternoon Update our Gas Weighted Degree Day (GWDDs) forecast ticked up slightly on afternoon guidance as slightly more cooling demand was shown long-range, though afternoon Climate Prediction Center forecasts for the long-range actually decreased the odds for above average temperatures in the 8-14 Day time period across the middle of the country. Weather swings are certainly not as significant for natural gas demand this time of year, but they can still make incremental demand impacts that matter all the more given where current storage levels are. In our Afternoon Update we dove further into the future forecast and analyzed recent spread action in the context of fundamental changes over the past weekend. Weather forecasts remain relatively volatile and we continue to see them playing an incremental role in pushing prices along with balance expectations, and of course this Thursday's EIA print will be very important following three tighter-than-expected prints (our Morning Update contains daily 4-week EIA estimates). To begin receiving all our weather and natural gas-driven research try out a 10-day free trial here.
Friday, April 27, 2018 at 4:40PM
June natural gas prices pulled back dramatically on their first day as the prompt month contract, declining 2.4% from their previous settle and declining almost 2% from the May contract expiry yesterday. Declines were not even along the strip, either. Rather, for the first time in awhile, losses were most significant at the front of the strip, with later contracts declining more modestly. Such a decline makes it clear that the bullish May expiry yesterday helped prop up the front of the strip. Yesterday we saw contracts at the front of the strip rally the most into expiry, with the strip profile looking like the opposite of today's. Relevant spread charts were equally choppy as well, with the October/January V/F natural gas spread ticking higher with yesterday's rally but moving back lower with today's decline. Still, its settle was more narrow than it was a couple days ago, when the prompt month settle was a touch higher. This came as weather forecasts provided a bit less support today. Our Morning Update saw a slight decline in Gas Weighted Degree Days (GWDDs) compared to yesterday afternoon's forecast, which appeared to contribute to this front-led selling. Though GWDD losses were certainly not all that significant, coming after a day (and a week) where we saw the front of the natural gas strip run up so much they were unlikely to provide much support (this chart is also from our Morning Update). The fact that natural gas prices peaked around the May expiry is not particularly surprising given the recent strength we have seen in Henry Hub cash prices with gas storage levels sitting so low and short-term cold still impressive. Next week we will announce the first injection of gas into storage, however, and from there injection size is projected to increase through May. In our Pre-Close Update this afternoon we outlined for subscribers both how weather forecasts were likely to change over the weekend and what influence that was likely to have along the natural gas strip next week. We also looked at how spread movement today appeared to skew risk next week, and of course at whether the tighter than expected EIA print yesterday will be enough to continue keeping natural gas prices bid. To view this Pre-Close Update, along with all our other integrated weather and natural gas-driven analysis, try out a 10-day free trial here.
Thursday, April 26, 2018 at 4:45PM
The Energy Information Administration announced that last week we pulled 18 bcf of gas from storage, beating out our estimate of 11 bcf and indicating a market that is still marginally tighter than we had expected. The result was a strong expiry for the May natural gas contract, which went off the board with a pop and expired more than a percent above its settle yesterday. The entire strip rallied, but gains were strongest at the front into expiry following this larger-than-expected draw. The result was a May/June K/M contract spread expiry that was the second narrowest since 2012. Right away we saw the print as supportive of this market into expiry, alerting clients afterwards in our EIA Rapid Release that it was slightly bullish overall. Our Morning Update had similarly identified that the May contract could try and move above $2.8-$2.82 with a net implied flow more bullish than -15 bcf. Overall, though, this grind up in prices has been relatively slow, and later contracts have struggled to join in as we have seen spreads like the May/October K/V spread narrow dramatically. Headed into the weekend then traders have this EIA print to sort through as well as the strong May expiry and indications of the first sizable cooling demand coming with a brief shot of warmer air across the country later next week. In our Afternoon Update we broke down the latest spread movements and price action in the context of today's EIA print, our reading of balance, and of course current and forecast weather trends. To give this report a look and begin receiving all our other detailed weather and natural gas-driven analysis try out a 10-day free trial here.