Monday, September 16, 2019 at 2:01PM
For a couple of days last week, it looked like the abnormally hot pattern in place was finally ready to fade away, but weather models over the weekend jumped notably hotter for the second half of September. Here is today's GFS ensemble forecast for next week, for example. Back on Friday, this is what the forecast looked like from the same model, valid the same dates. Given that the change included a hotter southern half of the U.S, this was enough to boost natural gas demand compared to forecasts back on Friday, as seen in our forecast Gas-Weighted Degree Day (GWDD) change in our morning update. This September's projected GWDD total is among the highest in the historical dataset. While of course not the sole reason for the large natural gas rally over the last few weeks, it has definitely been about as supportive as weather can be at this time of the year. Should the run of warmth last a few weeks longer, however, it would transition into a bearish factor. Some models, such as the CFS, indicate such a possibility, which is tough to argue with, as warm-dominated as the pattern has been since late June. CFS October outlook: That said, persistence works until it doesn't, and the weather world can turn on a dime. That's where our research comes in handy, in order to anticipate changes before they occur and stay a step ahead of the market, especially as we head into the weather-heavy colder season coming up. Sign up for a 10-day free trial here to take a closer look at all of the products we have to offer the active trader in the natural gas market.
Friday, September 13, 2019 at 5:07PM
For the third week in a row, natural gas prices posted a notable gain, closing nearly 12 cents higher on the week, with the prompt month October contract settling over the 2.60 level for the first time since late May. As we have pointed out previously, this is the time of year that prices often do move in favor of the bulls. This year's rally, percentage wise, has been quite large, however, partially due to such a low starting point, having been at multi-year lows for a prolonged period, but also due to a very large number of shorts in the market. As prices move up, some of the short are forced to cover, sending prices even higher. The catalyst that sparked the move was a large run up in daily cash prices, although those appear to have peaked earlier this week. We did see a pullback of more than 10 cents earlier in the week, before prices shot back higher after yesterday's EIA report showed a smaller-than-expected build for last week, and then again today toward the close, the latter of which may have simply been additional short covering as traders de-risk into the weekend. Looking ahead, trends in cash prices may still hold the key to the movement of futures. We still have some heat in the forecast, mid-September style, enough for well above normal natural gas demand in the near term. You will notice, however, by week two, that demand drops off considerably, and even the forecast for the upcoming week, while still impressive from a demand standpoint, is not as hot as models had forecast a couple of days ago, as seen by the large 2-day GWDD change in last night's modeling. Time will tell is this is enough to take the "heat" off cash prices, and in turn, provide at least a temporary halt in the strong rally of the last three weeks. Of course, all of the factors involved are fluid in nature, subject to change as new data rolls in. We are constantly monitoring both weather and fundamentals in order to anticipate market changes before they occur. Sign up for a 10-day free trial here to take a closer look at our current suite of products, which will be added to very soon, and let us help keep you ahead of the market.
Wednesday, September 11, 2019 at 2:47PM
While the official start of Autumn lies just around the corner, Summer refuses to go away without a fight, as an unseasonably strong upper level ridge sets up in the eastern half of the nation, making it feel like the change in seasons is still far away. Our forecast is about as hot as you will see it at this time of the year. This is resulting in quite the boost for natural gas demand, with multiple days of 10 or more Gas-Weighted Degree Days (GWDDs). The hottest days over the next week will actually be challenging daily GWDD records, and this is pushing our projected GWDD total for the month of September up the charts, not quite to last years level, but among the hottest Septembers recorded in our dataset. Looking at the numbers for key cities across the nation, something new here at Bespoke, we find plenty of 80s and 90s from the Midwest to the Mid-Atlantic and down into the South. While certainly not the only factor that has led natural gas prices higher over the last 2-3 weeks, it has, at the least, provided some tailwinds for the bulls, with prompt month prices around 50 cents off their early August lows. Once to late September, it starts to get a little late for heat to move the needle, as we begin to patiently wait for that first colder outbreak in October than brings in our initial ramp up in HDDs. This typically puts weather on the back burner, so to speak, at least temporarily, allowing other forces, such as supply / demand balances to have control of market movement. Our services keep you up to date on both, with detailed coverage of weather as well as natural gas fundamentals, allowing you to anticipate changes in market sentiment before they occur. Sign up for a 10-day free trial here to take a closer look at all of the products we have to offer, with several new additions on the way, just in time to prepare for the upcoming cold season.
Friday, September 06, 2019 at 4:58PM
We mentioned the other day how this time of the year often is much more "friendly" to natural gas bulls, and that has rang true and then some, with prompt month prices soaring higher again today, even testing the 2.50 level in today's trading session. This an important zone from a technical standpoint, which we will get to in just a moment. First, a look at our seasonality chart shows that this rally has almost been enough to completely close the gap between 2019 and the pack of prior years. In total, the front of the curve has gained nearly 35 cents over the last month, and about 45 cents from the early August lows. But let's get back to that important technical zone, highlighted in yellow, up above. This is the zone which acted as very strong support for three years, since the Spring of 2016, that finally broke a few months ago. As all of you chart technicians are aware, this broken support now acts as what should be strong resistance, meaning that, if there is any bearish catalyst, you could get more of a reaction to the downside off this level. Now, we are not about to imply that this means we will move lower next week. We still need that catalyst, which will likely have to come from the cash market. Our discussions all week have talked about the cash-led nature of this rally, as storage tries to refill as much as possible ahead of the cold season, with weather demand being strong enough to hinder those refill efforts thanks to intense heat in the South. After this weekend, southern demand finally will gradually tail off. Will this be enough to take some of the "heat" off Henry Hub cash prices and allow the 2.50-2.54 prompt month resistance to hold? Sign up for a 10-day free trial here to take a look at what our research suggests as far as answering this key question, and where natural gas prices are likely to go next.
Thursday, September 05, 2019 at 7:34PM
Today's EIA release revealed that last week's storage build was a little larger than expected, with an injection of 84 bcf reported. After such a strong rally over the last week and a half, one would expect a correction based on the larger build, and we did see one, briefly, as prompt month prices fell to just under 2.39, but the decline was quickly bought back up, with the contract closing just a penny lower on the day at 2.435. Most of the curve, in fact, closed higher on the day, with only October and November contracts in the "red". Why the resilience in prices? There are a couple of things to mention. While the build was larger than forecast, it still was a little tighter in terms of supply / demand balances compared to the prior week. The number does little to alter end-of-season storage expectations, with most estimates in the 3.70 to 3.75 tcf range for the end of October. As we discussed yesterday, this rally has been predominantly a cash-led one, as storage looks to refill as much as possible in advance of the winter season. As long as cash remains strong, downside is somewhat limited. Forecast demand remains very strong for this time of year across key areas of the South, with mid summer-like heat in full swing in many areas, including widespread upper 90s to low 100s in Texas for the next several days. This can be visualized by looking at one of our new regional tools, focused on the Gas-Weighted Degree Day (GWDD) forecasts just for the south-central EIA region. Notice there is not much drop-off in southern GWDDs for another 7-9 days. This keeps demand for natural gas stronger than normal, and could continue supporting daily cash prices. But then there is the wind factor, as ERCOT winds are forecast to increase considerably by early next week. All else equal, while it remains hot, the increase in wind generation should take away some of the demand on the gas side, possibly allowing cash prices to ease off, and thus, impacting futures as well. Of course, this is just one piece to the complex puzzle that makes up the natural gas market. Our role is to put all of the pieces together in order to offer a simplified view and anticipate the next market move. Sign up for a 10-day free trial here to take a closer look at the products and tools we have to offer. This list of tools will be added to in time for the upcoming winter season, so don't miss out!
Wednesday, September 04, 2019 at 8:50PM
Okay, so it is a little early for Christmas references, but we have entered the time of year where the natural gas world is often kind to the bulls, which is something that has not been the case very often since the big run up in the first part of last winter, as prices declined to new multi-year lows. Notice how prices often rise after the beginning of September. This year, we actually got a head start with some rallying last week off price levels below 2.20 in prompt month. That rally has continued unabated this week, so far, with prompt month prices touching 2.45 in today's session, more than 10% higher than we saw early last week. Surely, with a rally this strong, the data must have shifted pretty strongly over the last week. Well, not exactly. Production remains quite high, posting above 93 bcf / day on numerous days. How about LNG? We did see new highs last week, but so far this week, LNG intake has actually declined. The difference must lie in exports to Mexico, as they have been rumored to increase any time now, as the Sur de Texas pipeline comes into service. No, nothing notable there either. Quite simply, this has been a cash-led rally, as we are getting later in injection season and storage tries to fill as much as possible heading into the cold season, and prices had been held down at levels that are very difficult to sustain for quite awhile. We have been playing for this move for awhile, with suggestions such as buying the October / January (V/F) spread, along with selling puts showing up in our weekly trade ideas over the last several weeks. The V/F spread has rallied nearly 14 cents over the last month. We cannot leave weather out of the discussion, as we finally saw the expected shift hotter over the holiday weekend, with demand solidly above normal for the next couple of weeks across the south, doing its part to hinder storage refill efforts. Lastly, we must mention the large short position that the market has held for the last several weeks, adding more fuel to the bullish fire as some of these shorts are forced to cover on the way up. Is all of this enough to continue pushing prices even higher, or are we due to level off / pull back? Sign up for a 10-day free trial here to take a closer look at what our research suggests as we close out the warm season and look ahead to what is sure to be a volatile winter.
Friday, August 30, 2019 at 8:28PM
Hurricane Dorian is obviously on the minds of many folks this evening, and earlier our own chief meteorologist Brian Lovern was featured on Bloomberg television discussing the projected path and uncertainties regarding the future of the storm. Interview begins about 16 minutes into the linked show. The storm is currently a major category 3 hurricane, projected to move toward Florida and then turn north, with the timing of the turn being the key in determining a hit early next week, skirting of the coast, or a miss of the Florida peninsula. Forecast models have been all over the place, with no consistency as of yet. Residents of Florida are urged to be prepared for the worst, in case a direct hit pans out, but will be hoping for the best. Bespoke clients have also been alerted to the possible influence the storm could have regarding natural gas demand, as a hit could leave millions without power, significantly impacting gas burns, while an earlier turn would have much less effect. Interested in learning more about our services and how they can help keep you a step ahead of the storm, as well as the moves of the natural gas market? Sign up for a 10-day free trial here to take a look at what we have to offer, and become a client today.
Tuesday, August 27, 2019 at 1:54PM
It has been a very slow hurricane season so far, but as we head now into what is typically peak season, things are coming to life. We are tracking a couple of systems out in the Atlantic basin, with the focus being on Tropical Storm Dorian, entering the eastern Caribbean Sea. The storm is moving off to the west-northwest, which is predicted to continue the next few days by the National Hurricane Center. A couple of things stand out here. The most obvious is the track which heads up into the Bahamas and then to the east coast of Florida this weekend. But you will also notice that it is forecast to stay a tropical storm. It has a big fight ahead of it in the near term, battling dry air, and then perhaps contending with the island of Hispaniola, notorious for tearing tropical systems apart, so there is some risk it doesn't even survive beyond that point. If it is able to do so, the environment once into the Bahamas would become more favorable for development, and that's where it could intensify more than forecast, again, if it survives. Needless to say, all interests in the Bahamas and Florida need to watch this one. What about the Gulf of Mexico? We can't write that off as a risk, as some members of the ensemble modeling do bring the system across Florida and into the Gulf early next week. So, yes, even Gulf interests should keep one eye on Dorian. Risk is low right now due to how far away it is, and the battles in front of it. We will know more in 2-3 days after it clears the big islands of the Caribbean. We also have Tropical Depression Six off the Southeast coast, expected to become Tropical Storm Erin later today, but this one poses no risk for an impact here in the United States. We will closely be watching these systems, as well as the rest of the Atlantic basin as we move through the climatologically favored time of year for development to gauge possible impacts to the U.S, and of course, energy interests. Sign up for a 10-day free trial here to take a look at all of our products related to weather and natural gas fundamentals.
Friday, August 23, 2019 at 5:08PM
Natural gas prices wound up moving lower this week, closing about a nickel under last Friday's close, though we did see some of our usual volatility, as prices tested the 2.25 level in the September contract earlier in the week before sellers stepped in. The contract finished the week just over the 2.15 level. As usual, there were multiple forces at work. On the bearish side of the spectrum, we saw new all-time highs hit in natural gas production this week. We also saw cooler weather forecast changes for the final third of August into the first few days of September, with blue colors making a return to our forecast maps. On the bullish side, LNG returned to much higher levels this week, with maintenance on LNG facilities coming to a completion. We also heard earlier in the week that exports to Mexico could increase as early as next week, as the Sur de Texas pipeline begins service. Yesterday's EIA report came and went, and was mostly neutral, with the reported build coming in at 59 bcf for the week ending 8/16, almost dead-on our estimate of 58 bcf. In our view, that was not a complete rejection of the bullish EIA report last week, but was a little looser week over week, and still loose when looking at the same gas week in previous years. Of course, a lot of the "looseness" was still due to low LNG intake for the week, which brings us to the question, what do we see next in the world of natural gas? The return of LNG should help supply / demand balances tighten from here, but does production continue to make new highs to negate some of that impact? On the weather side, yes, it is September, so it is more difficult for weather to move the needle as much, but we are seeing some turning back upward in the forecast demand charts at the end of the 15 day period. Does the weather now begin to turn back in the more supportive direction after the Labor Day holiday weekend? We will casually mention that seasonality often begins to favor the bulls after Labor Day as well, although this is of course not something that guarantees a similar result this year. Our products can help you sort through all of these potential market-moving issues to give an idea how price action will behave next. Sign up for a 10-day free trial here to take a look at what we have to offer, and what our research suggests in terms of anticipating natural gas' next move.
Monday, August 19, 2019 at 7:36PM
It's not how you start, but how you finish. That's today's motto for the natural gas market, which looked poised to close potentially several cents lower on the day in early trading. The September contract was down more than six cents at one point before staging a major comeback and ending the day a penny higher than Friday's close. The initial downward push came as the result of bearish forces on both the supply and demand sides of the equation. First, we saw new all-time record highs over the weekend in natural gas production. On the demand side, the weather forecast shifted cooler, resulting in fewer Gas-Weighted Degree Days (GWDDs), or in simpler terms, less natural gas demand compared to Friday's forecast. Basic economics says when you have more supply and less demand, price should fall, and that's what happened in the early morning hours. But notice in the above graphic, despite the cooler change (fewer GWDDs), the 15 day GWDD total is still well above normal, some 12.5 GWDDs above normal to be exact. Furthermore, when looking at the daily GWDDs in chart form, we see that tomorrow is the hottest (highest GWDD total) of the entire forecast period. The high near-term heat led to strong Henry Hub cash prices, which at one point traded as much as 6-7 cents over prompt month, and rallied as the session wore on, taking prompt month prices close to unchanged on the day after the early morning lows. A second boost came about an hour before the market's close, as it was reported that exports to Mexico may increase as early as next week due to the Sur de Texas pipeline finally coming into service, finding a home for a little of the excess supply, as pushing prompt month prices over the top to finish green on the day. This continues the trend we have seen in recent weeks where there has been an abundance of intraday volatility even on days that wind up with a very small daily move, creating opportunities for the active trader to cash in on moves in both directions. Our research can help capture subtle changes in the data in order to highlight the potential for this kind of volatility. Sign up for a 10-day free trial here to take a closer look at the products we have to offer, and which way we feel prices may move next.