BWS Blog
Natural Gas Flat Following In-Line EIA Storage Number
Thursday, March 21, 2019 at 6:36PM
It was a rather slow day in the natural gas market, with the April contract settling just a tick higher in a 4.3-cent range. Bearish daily balances were canceled out by mixed weather forecasts and an in-line EIA print, keeping prices mostly range-bound.
Later contracts along the curve were stronger through the day, with April actually being the weakest overall.
The result is that the J/V April/October spread went out to recent wide levels.
These later contracts were firm enough to help the April contract defend the $2.8 support level. Our Morning Update was "Neutral" despite slight GWDD losses overnight we we highlighted that, "it still seems hard to break below the $2.8 level..."
Then the Energy Information Administration announced a draw of 47 bcf from storage last week, which was just 1 bcf away from our estimate of 48 bcf.
They also announced a 4 bcf revision lower in last week's 204 bcf draw, indicating that the draw actually should have been 200 bcf.
Despite the revision, the market did not move much after the EIA number, as it was seen generally confirming current expectations. Our EIA Rapid Release highlighted we saw the number as "Neutral," which verified well, and then our Afternoon Update took a look at natural gas price risk and expected weather changes headed into the weekend. To give this report a look, and begin receiving all our detailed weather-driven analysis, try out a 10-day free trial here..
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Weaker Balances And Warmer Weather Models Lower Natural Gas Prices
Wednesday, March 20, 2019 at 5:00PM
April natural gas prices ended the day down about five cents. The market came under pressure first on weak fundamentals data.
Unlike yesterday, where the front month contracts had the most relative strength, the front of the natural gas curve was the weakest.
This resulted in a complete reversal of yesterday's move in the April / May spread, with the spread going back negative today.
The reversal was also seen in the April / October spread, almost perfectly negating yesterday's move.
We saw additional pressure on prices from some of the midday weather models, most notably the American ensemble (GEFS), which made a notable warmer change out in the 12-16 day time frame when compared with the overnight 0z run of the same model.
The end of the model run also showed a pattern that would not be conducive for colder weather in the key energy consumption areas of the U.S, with an enhanced warmer ridge in the eastern part of the nation.
We must be cautious in trusting these weather models, as they have been prone to wild changes in recent days, and often do struggle in the transitional seasons of Spring and Autumn, but the warmer, lower demand idea does fit with the longer range climate models into the first half of April.
Moving forward, these recent weather changes will have to be judged in conjunction with latest balances along with tomorrow's EIA number. Sign up for a 10-day free trial here to give our research a look and see our viewpoint regarding risks to natural gas prices in the coming days.
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Cold End Of March Keeps Gas Afloat
Tuesday, March 19, 2019 at 5:39PM
It was a mixed day for natural gas futures, as colder weather forecasts helped the April gas contract settle a bit less than a percent higher on the day despite looser fundamental data.
The April contract was clearly the strongest on the day, with other contracts lagging behind on looser demand data.
The result was the first positive settle of the April/May J/K spread in quite some time.
The April/October J/V spread eclipsed the recent highs set last week as well.
Much of the support at the front of the curve came from bullish overnight weather trends that were outlined in our Morning Update.
Yet out sentiment was slightly bearish on the day due to bearish fundamentals besides weather that had us see intraday price downside. This worked out well until mid-day weather model guidance (particularly the GFS ensembles) progressed in an even colder direction (images courtesy of Tropical Tidbits).
Climate Prediction Center forecasts this afternoon accordingly eliminated the bulk of what seemed like high probability warm risks yesterday.
Tomorrow, traders will be weighing these recent weather changes against Thursday's expected EIA number and the latest daily balances, which we present to clients on a weather-adjusted basis. In our Afternoon Update we broke down our price and weather expectations for the week, showing how risk is skewed and what our latest weather forecast is. Try out a 10-day free trial here to give all that a look.
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April Gas Trends Lower On Milder End Of March And Loosening Supply/Demand Balances
Friday, March 15, 2019 at 4:51PM
The April natural gas contract settled down over 2% today as weather forecasts trended unimpressive through the day with balances doing little to support prices and cash trading weakly ahead of a weekend with one of the last cold shots of the season.
The April contract led the whole curve lower after it led the way higher yesterday.
We were all over this for clients, with our sentiment in our Afternoon Update yesterday turning bearish.
Our Morning Update also outlined the bearish risks to natural gas prices we saw through the day, highlighting a test of $2.8 likely "into early next week" following the gap fill we were watching at $2.856.
This came despite some slightly colder trends on overnight weather model guidance.
Then afternoon weather model guidance moderated further, keeping the front of the natural gas curve under pressure (images courtesy of Tropical Tidbits).
This came as we saw little in daily balance data to indicate prices were likely to bounce back, as Canadian imports were seen recovering a bit too despite lower production the last few days.
Just recently we published our Pre-Close Update, running through our expectations for where April natural gas prices are likely to head next week as well as how weather forecasts should change over the weekend and what price catalysts should arrive next week. To give that report a look, and view all our highly detailed weather and natural gas-driven analysis, try out a 10-day free trial here.
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Depleting Salt Storage And Firm Cash Keep April Gas Bid
Thursday, March 14, 2019 at 5:30PM
The April natural gas contract rallied a bit over a percent today despite an EIA number that was not quite as bullish as the market consensus, as the EIA still reported a massive draw in salt cavern storage and day ahead cash prices were firm.
The April contract was easily the strongest along the futures curve today.
The rest of the curve barely contributed, as seen by the April/October J/V spread shooting higher on the day.
Day ahead cash prices trading slightly above prompt month future prices have helped keep prompt month prices strong the last couple days as well.
Meanwhile, the EIA announced that 204 bcf of natural gas was pulled from storage last week versus our estimate (that was near the market consensus) of 209 bcf.
This week's storage number was seen as about in line on a weather-adjusted basis to the number last week and solidly tighter than the week before, though of course there was far more weather-driven demand last week than the week prior.
Traders are now looking at how daily balances are changing ahead of the weekend as well as what next week's EIA number could indicate about the seriousness of the current storage deficit. We covered all that in our Afternoon Update while also looking at how weather forecasts could change and influence natural gas prices moving forward. Try out a 10-day free trial here to give that all a look.
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Warmer Weather Forecasts And Weaker Balances Send Natural Gas Prices Lower
Monday, March 11, 2019 at 5:25PM
It was a solid down day for natural gas prices today, with the April contract finishing down just over 3% on the day.
The weakness was felt along the entire natural gas strip, though was more pronounced in the front month contracts.
Back on Friday, we took a "slightly bearish" stance in our afternoon update, citing risk of moderating weather forecasts helping to ease low storage concerns.
This worked out quite well, as forecast GWDD totals for the next couple of weeks were roughly 15-20 GWDDs lower than Friday's forecasts.
With balances already weakening, less weather demand means less natural gas burned, and allows the market to be more comfortable with storage levels.
CPC's forecasts show, in map form, a notable day over day change in the warmer direction.
While the pattern can still be described as "variable" rather than "warm", there are signs that warm may begin to win out toward the end of the month into April, as seen in the latest CFSv2 April forecast.
What will all of this mean to natural gas prices moving forward? Try out a 10-day free trial here to give our research a closer look!
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Shoulder Season Doldrums Keep April Gas Flat
Friday, March 08, 2019 at 4:44PM
The shoulder season doldrums appear to have arrived for natural gas traders, with the April gas contract losing just a tick on the day as weather models warmed but low storage fears keep the summer curve bid.
The summer strip was firmest, with both spring and winter getting sold.
The result was further widening of the April/October J/V contract spread, which settled as narrow as 8.4 cents this week.
Prices initially moved higher overnight, spurred by small overnight Gas Weighted Degree Day additions and supportive spread action yesterday.
Prices moved within 5 ticks of the $2.9 level we were watching before pulling back as afternoon weather model guidance moderated. The 12z GEFS was significantly less cold in the long-range (image courtesy of Tropical Tidbits).
Yet all these impacts on price were muted with demand swings significantly smaller. Our Morning Update was "Neutral," which verified well on this slow day, and volatility looks to stay low moving forward. Cash prices were fairly unimpressive too, indicating a narrow range likely into next week.
Yet there are still decent lingering cold risks, and how much cold we get can determine how close to 1 tcf natural gas stockpiles nationally are able to go. In our Pre-Close Update we outlined how we expect weather models to trend over the weekend and how we see natural gas price risk skewed moving forward. Try out a 10-day free trial here to give it a look.
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Low Storage Concerns Push Gas Prices Higher
Thursday, March 07, 2019 at 5:21PM
April natural gas prices ended the day up almost 1% after bouncing around in the early part of the session. Concerns over low storage levels combined with a colder than normal weather forecast were the culprit for the move up.
The gains were not confined to April prices, but extended throughout the futures curve.
We did observe some weakness early in the day, as the strongest cold is now behind us, with demand lowering into this weekend.
With temperatures moderating, cash prices were held in check, trading just over 2.90 today.
The early morning weakness was short-lived, with the market rallying ahead of expectations of a strong gas draw in today's EIA report, which came true, as we drew 149 bcf last week, much stronger than last year and the 5-year average.
We saw this number as supportive, as it was tight relative to the average over the last several weeks.
Afternoon weather models then went colder in week two, and these forecasts added additional support, allowing prices to end the day close to their session highs.
Our afternoon update dealt with all of these issues and outlined how we see natural gas price risk heading into the weekend. Try out a 10-day free trial here to give all of this research, and much more, a look.
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Weaker Cash And Briefly Warmer Models Let April Gas Retrace
Wednesday, March 06, 2019 at 5:07PM
The April natural contract settled down around a percent and a half as overnight weather models moderated slightly and Henry Hub day ahead cash prices plunged below $3.
After spiking over $4 to start the week Henry Hub day ahead cash traded back under $3 today.
Such cash action was enough to depress the April contract relative to the rest of the futures curve.
Thus the April/May J/K spread took a large turn down on the day.
This fit our expectations well, as we turned our sentiment "Slightly Bearish" in our Morning Update due to bearish spreads, warmer overnight model trends, and other fundamentals we saw moving in a bearish direction.
Overnight models were not all that much warmer, but GWDD losses were allowed to let the front of the curve at least retrace recent gains.
Then prices were able to bounce into the settle on colder afternoon weather model guidance, which the Climate Prediction Center showed in their Week 2 forecast probabilities as well.
Now, traders are preparing for what should be another hefty storage draw to be announced tomorrow. We outlined our expectations for how the number can impact prices tomorrow, as well as what our estimate is and how weather forecasts should change ahead of the EIA storage number as well. Try out a 10-day free trial to give that all a look.
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Storage Levels Creeping Lower Keeps Gas Firm
Tuesday, March 05, 2019 at 6:04PM
Attention today turned to low storage levels, as a growing storage deficit to last year kept a bid in April natural gas prices, allowing the contract to settle up nearly 3 cents on the day.
The rally came in spite of much weaker cash prices today, with cash trading a full $1 under yesterday's levels.
Forward spreads tightened today as well, especially the J/V April/October spread, which progressed quite a bit higher today despite the relatively small move in the April outright contract.
The low storage concerns are exacerbated by rather tight balances thanks to extreme cold across the country the last few days. Alongside significant demand we are still seeing LNG exports near highs, too, which have helped balances run tight since exports recovered back in mid-February.
Yet some of this tightness will certainly be transitory, as temperatures will moderate quickly across the country over the next few days. Still, as we noted in our Morning Update, some cold will remain, and overnight GWDD additions clearly added support to the forward curve today.
Climate Prediction Center forecasts continue to show colder trends this afternoon too.
What will these competing factors mean for the market moving forward? We continue to break it all down for subscribers, discussing how the current picture, as well as any changes, will impact prices. Try out a 10-day free trial here in order to gives all this in-depth research a look.
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Very Strong Cash Cancels Out Weekend HDD Losses
Monday, March 04, 2019 at 5:03PM
It was a case of dueling catalysts in the natural gas market today, as day ahead Henry Hub cash prices skyrocketed over $4 early this morning pulling the April gas contract higher but weekend HDD losses prevented any gains from holding. In the end the April contract settled just about flat on the day.
The largest losses were with summer gas, as winter gas was firmer on the day.
Very strong cash prices have pulled the April/May spread to flat.
Exploding day ahead prices today returned to levels that have not been seen since December.
In our Morning Update we warned that "cash should remain quite strong" but maintained a "Neutral" sentiment as saw recent GWDD losses canceling that out. The coldest days are in the short-term, as we noted, which would limit the extent to which futures would react to cash.
This verified quite well, as gas prices reversed lower through the day and the Climate Prediction Center picked up on these more pronounced warm risks in the medium and long-range.
Traders are eagerly awaiting the latest cash numbers tomorrow, as though cold will not be quite as intense Wednesday as it will be today and tomorrow it will still be quite strong. We'll be breaking down for subscribers how we expect April gas to react to cash as well as how cash should move overall and what the latest weather forecasts say about forward pricing risks. Try out a 10-day free trial here to give all this research a look.
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Exploding Cash Pulls April Gas Higher
Friday, March 01, 2019 at 5:16PM
What started seemingly like a relatively slow day in the natural gas space quickly turned exciting as physical gas prices shot higher through the morning. Next day Henry Hub cash spent much of the morning over the $3.2 level, pulling the April contract slightly over $2.87 before it pulled back slightly.
The cash-led nature of the rally was clear with the April contract leading through the day with winter eventually catching a bid later in the day.
The result was that the April/May contract approached flat levels, which it has not been at since late January.
This spread is far stronger than it has been at any point in the last several years besides 2014.
In our Morning Update we highlighted that with "near term cold likely keeping cash firm, and stronger prices for next winter, we can test the 2.85 level..." which played out well this morning on cash strength. This was more on our reading of balance and spreads versus overnight GWDD additions, which were not particularly impressive.
Afternoon model guidance was mainly mixed too, showing some lingering cold risks Week 2 despite warmth being able to return in the Southeast.
This came as the market shook off what was a slightly unimpressive EIA number yesterday. Now, traders are positioning for the weekend after this cash move pulled prices higher. The Climate Prediction Center sees mixed risks in their long-range forecast; this forecast would look for colder risks in the center of the country with some warmer risks in the East.
In our Pre-Close Update we sent out to subscribers earlier we outlined how we expected weather model guidance to change over the coming weekend, as well as how that was likely to impact natural gas prices. We also looked at how long this cash support can remain, and how balances should change into next week. Try out a 10-day free trial here to give it a look.
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Winter Gas Is Off The Board
Tuesday, February 26, 2019 at 5:18PM
The March natural gas contract expired up half a percent on the day at 2:30 PM Eastern, and with that the last contract of Winter 2018/2019 went off the board.
The March contract was the only one up on the day, with April selling off the most on warmer mid-day model guidance.
The result was the strongest March/April spread expiration since 2014.
Yet other spreads, such as April/October, actually tried to put in a short-term high today.
Meanwhile, cash was incredibly strong, trading over $2.9 through the morning session and propping the front of the strip up.
Afternoon weather model guidance then moderated quite a bit, with the 12z GEFS far warmer in the 12-16 Day time period (images courtesy of Tropical Tidbits).
In our Morning Update today we held a "Neutral" sentiment as despite strong cash prices and the potential for a March bounce into expiry we highlighted risks that forecasts into Week 3 would warm with 12z model guidance being less impressive.
This worked out well, and we also released our weekly Seasonal Trader Report with our long-range gas forecast that looked at just how much March may be able to warm. In it we dove deeper into an increasing El Nino signal upstream.
The April contract now takes over as traders turn to March weather forecasts and Thursday's EIA number to see where natural gas prices should head from here. Try out a 10-day free trial to see our thoughts for Thursday's EIA number as well as how natural gas price risk appears skewed into next week and how weather models should shift moving forward.
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March Gas Spikes On Early March Cold And Strong Cash Into Options Expiry
Monday, February 25, 2019 at 5:10PM
The March natural gas contract shot over 4% higher on the day today as cash prices traded over $2.85 and afternoon model guidance trended even colder for the first third of March.
The role of cash and the March options expiry was apparent in how much more the March contract ran out relative to the rest of the futures strip.
The result was a flip positive in the March/April H/J spread.
Our Morning Update highlighted a significant cold trend over the weekend that let prices gap up last evening.
Afternoon model guidance trended even colder in the medium-range too, helping prices run up into the settle (images courtesy of Tropical Tidbits).
Our mid-day Note of the Day for subscribers which went out a bit before 11 AM Eastern warned of bullish short-term data that would keep the March contract strong into tomorrow's expiry.
This verified well, as prices shot higher today. Part of this has been due to continued tight balances, with LNG exports at record levels playing a role.
It should be an exciting day tomorrow as volatility has returned to the natural gas market and the March contract heads towards expiry. We published our Natural Gas Weekly Update for clients today outlining what we expect price action to look like through the week, and our Afternoon Update outlined our thoughts for the March expiry tomorrow. Try out a 10-day free trial here to give all our analysis a closer look.
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