BWS Blog
V/F With Another Active Day
Monday, July 16, 2018 at 4:57PM
The August natural gas contract again traded within a relatively narrow trading range of just 4.3 cents, settling up a few ticks on the day after a weak gap up last evening.
Later contracts were not as strong, though, with only the front of the strip logging gains on the day.
The result was that the V/F October/January natural gas contract spread narrowed significantly today after setting recent wides on Friday, which was the subject of our blog then.
This comes as forecasts remain hot enough through the next couple of weeks to keep the front of the strip bid, but apparently not hot enough to overcome concerns about growing production.
In our Natural Gas Weekly Update for clients today we outlined current weather forecasts and how we expected them to change this week, explaining how that should impact natural gas prices. We also took a deeper dive into current balances, looking at how balances and weather may play off each other in driving price. We noted lingering cool risks into the Ohio River Valley which the Climate Prediction Center reiterated again today in their afternoon update.
In today's Note of the Day we broke down for clients how much the latest weather-adjusted power burns were able to offset recent production growth, and how that should impact both prices and natural gas storage levels moving forward. To give this report a look, and begin receiving all our detailed weather and natural gas-driven analysis, try out a 10-day free trial here.
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Seasonal Nat Gas Lows And Seasonal V/F Wides Today
Friday, July 13, 2018 at 4:33PM
The prompt month August natural gas contract sold off another percent and a half today, giving traders the lowest prompt nat gas settle since May 9th.
This fit perfectly with expectations provided to subscribers in our Weekly Natural Gas Update on Monday, where we outlined why we expected any weak bounces early in the week to fail and why prices would likely test $2.75 support (where they settled today).
Yesterday our intraday Note of the Day also explained why a $2.75 test was likely coming sooner rather than later, and we also forecast for it to hold due to tighter weather-adjusted power burns.
Overnight guidance last night trended modestly less hot right in line with our expectations, and that appeared to combine with continued elevated production to send prices into resistance.
Initially the whole strip was declining around equally, though below $2.77 we began to see increasing prompt isolation which continued into the settle.
The result was that the V/F October/January natural gas contract spread settled at its widest level since April 12th, as the winter contract found support into the settle.
Such a move in the spread makes sense given lingering concerns about low storage levels and tighter weekly storage data. At the front of the strip we have seen widening as well, though, as slightly cooler risks across the Midwest and East have been partly priced in by the Q/V August/October spread.
We used this strip analysis yesterday in our Thursday Note of the Day to identify that $2.75 support would hold into the weekend, providing subscribers a target today when prices declined off those cooler weather runs.
We head into the weekend with traders continuing to keep one eye on weather and the other on balance. In our Note of the Day we looked at the latest weather-adjusted balance today and outlined how it would likely impact prices into early next week, and then most recently in our Pre-Close Update we provided an updated 15-Day GWDD forecast and explained how weather models were likely to trend over the weekend. All of this allowed for an updated natural gas sentiment and risk discussion, helping traders position ahead of the weekend. To give these reports a look, and begin receiving all our detailed weather and natural gas analysis, try out a 10-day free trial here.
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Another In-Line EIA Print Keeps Natural Gas Quiet
Thursday, July 12, 2018 at 4:41PM
It was another EIA Thursday for natural gas today, but an estimate that fell solidly within analyst expectations did little to move prices. Production levels that are sitting just off record highs seemed to weigh on prices, and an EIA print that showed relatively little holiday demand destruction but otherwise hit expectations did little to change that.
The EIA announced that 51 bcf of gas was injected into storage this past week. This compared to a 5-year average of 77 bcf.
The largest build came across the Midwest, while Salts saw another weekly draw.
As we had mentioned to clients throughout the week, July 4th holiday demand destruction appeared unimpressive on daily power burns, which remained quite tight on a weather-adjusted basis through last week. That is exactly what this EIA print showed as well, with very limited loosening compared to last week's print.
This is the second straight week where the storage injection in the East came in decently smaller than would be implied by a simple regression against the Dominion and Columbia storage numbers released on Monday.
Still, the natural gas market was unimpressed with this lean storage injection, with the whole strip declining on the day.
Losses carried into J-V9 as well, with H9/J9 actually moving up on a day that the prompt month contract lost over a percent.
Subscribers today received a detailed breakdown of the EIA print immediately after its release, getting to see its weather-adjusted tightness to the 5-year average, last year, and 2018 on balance. We broke down how the print impacted our reading of weather-adjusted balance moving forward, then in our Note of the Day and Afternoon Update explained how our expected weather trends into the end of July would combine with current natural gas balances to impact prices. To give all this research a look try out a 10-day free trial here.
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Tightening Balances Helps Gas Bounce
Wednesday, July 11, 2018 at 5:30PM
Natural gas prices canceled out yesterday's decline almost perfectly, rallying a percent and a half on the day to settle a tick above where they settled Monday.
The whole strip got in on the rally, with the front of the strip barely logging the largest gain on the day.
Initially prices received some support from overnight weather forecasts which added back some GWDDs.
We noted balance improvements in our Note of the Day as well that became more apparent later in the day along the natural gas strip, with the V/F October/January spread barely moving on the day.
Helping balances recently have been LNG exports that, while off April highs, are still far more elevated than they were for much of May and the start of June.
Traders are also focusing on the storage injection to be announced by the EIA tomorrow. Tomorrow's print includes the July 4th holiday, which typically includes a significant amount of holiday demand destruction. The result is a 5-year average that is solidly above last week's, though last year we saw a slightly smaller injection even with the holiday.
Yet heat was intense enough to ensure that the injection to be announced tomorrow will be solidly smaller than the one announced in the previous week, with our weather-adjusted modeling showing power burns not loosening quite as much as we had expected around the holiday as well.
Our Afternoon Update today broke down our expectations for price action into the EIA print tomorrow, as well as what our expectation is and how recent weather changes are likely to influence prices into the weekend. There is a rather wide range in estimates for the print tomorrow, and after today's reversal it is quite likely that the print will help determine the natural gas direction for the remainder of the week. Our Morning Update tomorrow will break down overnight weather changes and our fianl expectations into the print, and immediately following the print we will send out our EIA Rapid Release providing a weather-adjusted look at the print, updated end of injection season storage estimate, and price risk analysis. To receive these reports, and all of our other weather and natural gas-driven analysis, try out a 10-day free trial here.
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Cooler Late July Adds To Natural Gas Pressure
Tuesday, July 10, 2018 at 4:36PM
The August natural gas contract fell another almost percent and a half today as cooler risks later in July combined with elevated production levels to pressure prices lower.
We first saw risks for these cooler trends for late in July back at the end of May, when we warned clients that any rally in prices into July would likely fail and reverse.
More recently, our Morning Update highlighted cooler trends that began becoming more apparent overnight last night, with slight GWDD losses in the medium and longer-range.
This had our sentiment being slightly bearish on the day, as we warned subscribers that prices could initially bounce early this morning on any lingering cash firmness (like they did) before reversing back lower.
As seen in our Afternoon Update today, the Climate Prediction Center has clearly picked up on some of these longer-term cool trends too, especially in the 8-14 Day time period.
These are cool risks that we have been tracking now for over a month, but they have become even higher confidence more recently. For example, our Note of the Day last Friday explained how weather would eventually break natural gas prices lower this week.
Moving forward, now, the natural gas market has to contend with how legitimate these cooler trends will be and what kind of staying power they may have. Already we have seen elevated production depress the H/J March/April 2019 spread as noted yesterday, and this trend only continued again today (aided by the fact that we would burn less gas with less impressive heat later in July as well, allowing for larger injections into storage).
Today we published our updated Seasonal Trader Report, including our 5-month GWDD forecast, seasonal trade idea generator, seasonal storage model, and seasonal sentiment breaking down our expectation for the coming months of natural gas price action. We have recently had a very strong reading on natural gas balance and price action, increasing confidence in our sentiment and trade ideas. To give this report a look, and begin receiving all our detailed weather and natural gas-driven research, try out a 10-day free trial here.
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Production Keeps Pressuring Natural Gas
Monday, July 09, 2018 at 4:49PM
We hope you all had a great July 4th holiday, and are happy to be back with our free natural gas analysis. Over the holiday week we saw prices move solidly lower, a trend that continued today with the August contract settling another percent lower.
We were all over this last week, with our Monday Natural Gas Weekly Report holding a slightly bearish sentiment for the week due to risk for cooling forecasts and very bearish seasonality along with record production levels.
Prices did find some support off heat through the week, and burns did not loosen all that much around the July 4th. Traders were also looking for a smaller EIA injection last Friday to get prices moving, but the print hit our expectation perfectly and prices changed little into the weekend.
Then over the weekend we noticed some hotter medium-term trends that were canceled out by cooler long-term trends, not providing all that much support for natural gas prices today with only minimal net weekend GWDD additions (as seen below in our Morning Update).
Clearly, much of the recent decline in prices has been due to lessening concerns about low storage levels thanks to production rising to record highs. Over the past couple of weeks we have seen the H9/J9 March/April spread plummet, an indication that storage concerns are waning.
Meanwhile, weather continues to keep the front of the strip propped up, with Q/U August/September flat on the day even as the whole strip declined.
In our daily reports, we take a look at natural gas balance, price action, spread movement, and weather changes, providing clients a holistic view of the natural gas market. Recently our reading of balance and EIA estimates have been very accurate, as have our daily and weekly sentiments as we are able to identify future changes in weather model guidance as well as current weather-adjusted balance. This allows clients to position ahead of any larger flat price and spread moves, having the confidence to act before the change in fundamentals gets priced in. Try out a 10-day free trial here to see how we can help you manage risk in the natural gas market.
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Hot Early July Can't Save Natural Gas
Friday, June 29, 2018 at 4:31PM
Natural gas prices were off slightly again today after their reversal yesterday, attempting to recover a couple times on the day but proving unable to flip positive.
Record production levels clearly weighed on prices, hitting the entire front of the strip.
The result was the October/January V/F spread being flat on a down day for the prompt month August contract.
Overall, though, it was a rather slow trading day, as is typical of Fridays in the summer for natural gas. The day fit within the expectations laid out for clients in our Afternoon Update yesterday.
Natural gas trading this week also hit our ideas from our Monday Weekly Natural Gas Report near perfectly, as prices after their initial dip caught a bid off heat and tighter burns before reversing lower yesterday.
The Weekly Report highlighted the opportunities in both the long and short direction well, with prices closing right above that $2.87-$2.92 support level and reversing off $3-$3.05 resistance yesterday. They continue to be aided by very hot forecasts, as seen again by the latest forecast today from the Climate Prediction Center.
In our Pre-Close Update which we just sent out to subscribers we broke down how we expect weather models to trend over the weekend and into next week, and where the pattern looks to go for the remainder of July as well. We also took a closer look at daily weather-adjusted balanced in our Note of the Day, breaking down how that will be impacted by the July 4th holiday next week and what impact on price that could have. To take a look at all that research and see how we can help you navigate the natural gas market, try out a 10-day free trial here.
PS. Bespoke Weather will be on a vacation schedule next week. While we will continue regular updates for subscribers, the blog will be temporarily suspended. We'll be back the following week with more commentary and analysis though, and we hope you have a great 4th of July!
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A Leaner Injection, A Revision, And A Confused Natural Gas Market
Thursday, June 28, 2018 at 5:33PM
It was an active day along the natural gas strip, with prices initially rallying ahead of this morning's EIA print before a slightly smaller injection but larger revision to last week's report sent prices back lower.
The EIA announced that 66 bcf of gas was injected into storage last week, but the week before revised the reported injection from 91 to 95 bcf.
The natural gas market initially declined a couple cents off the print but continued to decline through much of the morning and early afternoon from there, partially reacting to what was an even looser than expected week the week prior to last. This came after a quick pop above $3, which we warned about in our Morning Update where we advised that any move above $3 was unsustainable. We accordingly had a slightly bearish sentiment that had carried over from yesterday afternoon.
Our weather-adjusted power burn modeling picked up on significant tightening last week that made it more likely that this week's EIA print would miss to the low side. Sure enough, the print came out smaller than the previous week and the last 10 weeks on average.
Before the tightening last week it was clear we were even looser than the market had realized, however, and that hit the front of the strip hardest through the day today.
Attention tomorrow will turn to expected weekend weather trends, as traders will focus in on how long heat is likely to last through the month of July. We have been seeing significant changes in daily balances on both the supply and demand side as well that have been influencing price action, and in our Note of the Day we have been breaking that down with our latest weather-adjusted modeling for clients. In our Afternoon Update we just explained how we see the weather, today's EIA data, and the most recent daily balance data working together to drive price into the weekend, looking along the strip for clues of which will be the strongest catalysts. To give this report a look, and begin receiving all our weather and natural gas-driven research, try out a 10-day free trial here.
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Early July Heat Leads To Strong July Nat Gas Contract Expiry
Wednesday, June 27, 2018 at 4:57PM
The July natural gas contract went off the board with a sizable rally, thanks in part to very impressive heat expected to start the month of July.
The July contract went off the board at $2.996, just 4 ticks from our $3 expectation this morning and following in line with our expectations from our Afternoon Update yesterday that prices would see strength into expiry.
The July contract clearly led the rest of the strip higher into expiry, with later contracts lagging further behind.
Strong cash prices have played a significant role ahead of heat that should be very impressive for the first week and a half of July.
We have been warning clients about this heat for more than a week. Our Note of the Day from June 19th explained why what was then Week 3 heat would bring a natural gas rally. The heat was intense enough that we have seen two; one last Wednesday/Thursday and another today.
The heat can be seen to have significantly narrowed N/V in the last couple of weeks as well.
Attention now turns to tomorrow's EIA data, where estimates range for the injection from anywhere in the low 60s to the mid 70s. In our Afternoon Update we broke down our expectation for price action into the print following today's expiry, as well as where price risk appears skewed post-print and what we expect the number to show about current balance in the natural gas market. After the print tomorrow we will release our Note of the Day and EIA Rapid Release which break down our latest views on weather-adjusted balance in the natural gas market and how the latest EIA print should impact expectations into the weekend. All this helps provide clients with a holistic view of the natural gas market, allowing them to prepare for price risk along the strip. Try out a 10-day free trial here to start receiving all this research.
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July Natural Gas Contract Expiry Approaches
Tuesday, June 26, 2018 at 5:13PM
The July natural gas contract settled slightly higher on its options expiry today, with the contract set to expire at tomorrow's settlement.
The July contract clearly led the way higher, with most of the move higher coming into the settle as options expiry helped volume surge.
The result is that we continue to see the N/Q spread move further backward, with 2016 the only other time we saw the spread move this backward approaching expiry.
That 2016 July contract expiry came ahead of a July that saw very significant heat across the South and East.
July this year looks to start quite hot as well, with recent Climate Prediction Center forecasts continuing to favor significant heat across the country in the 8-14 Day time period.
This helped lead us to forecast a strong options expiry for the July contract in our Morning Update this morning.
Then in our Seasonal Trader Report out later this morning we broke down for clients our updated 5-month GWDD forecasts, including what to expect for the rest of July. This came with our Seasonal Trade Idea Generator which provides a look at where risk is skewed along the natural gas strip. Our intraday Note of the Day also looked at when early July heat may break and potential impacts from our updated data on weather-adjusted power burns and balance as well, all combining to provide a broad overview of the natural gas market. To give all this research a look, try out a 10-day free trial here.
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The Pacific Keeps Warming
Monday, June 25, 2018 at 4:50PM
It's Monday, meaning NOAA has again released their weekly report on ENSO Evolution, Status and Predictions that outlined their current El Nino Watch. In it they showed that the Pacific again warmed last week across the key Nino Region 3.4.
The below chart shows how this warming across Nino Region 3.4 compares to similar past years.
A vast majority of climate models show this warming as likely to continue as well, with more pronounced El Nino conditions by the fall.
The American CFSv2 climate model shows this well.
Of course, the rate that the Pacific warms will play a large role on expected weather conditions through the summer and into the fall. As seen below, in July, August, and September cool risks tend to increase across the Midwest when El Nino conditions are in place.
That's certainly a lot different than what the current 8-14 Day forecast shows from the Climate Prediction Center, as we have not yet seen a warming Pacific translate into a more Nino-like atmospheric pattern.
In our Seasonal Trader Report tomorrow we will break down our latest 5-month GWDD forecast for clients, analyzing how the forecast has changed from last week and what that likely means for natural gas prices moving through the summer. We will also update our seasonal storage model which integrates the latest seasonal forecasts with current weather-adjusted balance to show what range of possibilities remains for natural gas prices this summer into the fall. To begin receiving this report, and to start looking at our numerous daily weather and natural gas-driven reports, try out a 10-day free trial here.
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After Early Selling, Another Range-Bound Gas Week
Friday, June 22, 2018 at 4:43PM
After a gap up in natural gas prices Sunday evening, natural gas bulls quickly found themselves in trouble as prices sold off through the day on Monday following signs production had returned to record highs. Selling continued into Tuesday, though long-range heat helped prices bounce Wednesday before bearish EIA data yesterday pulled prices back from resistance and pushed them lower today.
Overall, this price action fit nicely with our expectations set in our Weekly Natural Gas Report on Monday. In the report we laid out why we expected models to trend hotter in early July and how that would push prices back up into resistance, with the eventual break of $3 turning into a shorting opportunity thanks in part to the loose balances demonstrated in a larger storage injection than expected last week.
Those hot model trends certainly came to fruition, with our Morning Update showing that GWDDs could approach record levels (since 1981) to close out June or bring in July.
Such early July heat has been remarkably well-demonstrated by a number of atmospheric indicators we follow for long-range pattern trends. In fact, even last Friday (June 15th) we had warned clients to expect long-range forecasts to heat up over the weekend and into the following week.
Now, we head into the weekend with the Climate Prediction Center showing very significant odds for heat in the long-range.
Even with this heat, however, the natural gas market was unable to rally to close out the week, with solid losses all along the strip.
This appeared more balance-driven, as we explained to clients in our intraday Note of the Day. This Note of the Day included our new Daily Natural Gas Balance View, looking at trends in production, LNG exports, and weather-adjusted power burns/demand to cover all aspects of natural gas balance. The natural gas strip seemed to confirm our reading of balance in our Note today, with N/V only widening 2 ticks on a day where the prompt month July contract fell over a percent.
N/Q also remains outside its historical range, thanks primarily to very impressive early July heat combined with far lower storage levels than usual.
In our Pre-Close Update for clients we break down what recent price action and spread movement means for natural gas price risk moving forward. We similarly break down expected weather model trends over the weekend, and how we see weather-adjusted balances likely to shift moving into next week as well. All of this helps us provide the most accurate and holistic analysis of the natural gas market possible, with weather-adjusted balances allowing us to isolate the role of weather and determine how much of an impact our expected day-to-day and week-to-week weather forecast changes will have on natural gas prices. To give this unique approach to the natural gas market a look, https://www.bespokeweather.com/subscribe/new
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Weather Overrules Bearish EIA Print
Thursday, June 21, 2018 at 4:50PM
Today's natural gas EIA print seemed to confirm the slight bearish miss that was observed last week, when the EIA reported last week we injected 91 bcf of gas into storage.
The print fell in line with other prints through the last 10 weeks, and generally matched a slightly larger injection observed last week.
Yet the natural gas market shook off the print, declining 6 cents initially off it before recovering into the settle.
The front of the natural gas strip led the way higher, thanks in part to weather forecasts that remain very bullish.
Our Morning Update showed very impressive GWDDs are still expected over the next couple of weeks, and it was a combination of forecasts and our latest reading of daily weather-adjusted balances that led us to correctly conclude in both our EIA Rapid Release and Note of the Day today that natural gas prices would recover into the settle after the EIA-driven decline.
Climate Prediction Center forecasts have continued to pick up on these increasing heat risks as well.
The natural gas strip is reacting as expected, with N/V narrowing significantly again today.
We've noticed increased accuracy in our market discussions and natural gas sentiment following the additions of our seasonal storage modeling and daily weather-adjusted demand analysis. This comes in addition to our detailed GWDD forecasts and weather-driven discussions, as well as our analysis of spreads along the natural gas strip. In this way we provide a holistic view of the natural gas market, isolating and distinguishing the role of weather and indicating how risk is skewed all along the strip. Try out a 10-day free trial here to see for yourself how this market approach can help.
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Natural Gas Recovers On Long-Range Heat
Wednesday, June 20, 2018 at 5:05PM
July natural gas prices rallied a bit over 2% today as very bearish balances let up and weather forecasts remained quite supportive in the long-range.
Weather clearly played a strong role in today's price action with the front of the strip leading the way higher.
In our Afternoon Update yesterday we outlined to clients why our sentiment had turned slightly bullish, as we saw prices moving back up towards the $2.97-$3 level.
Our Morning Update also reiterated that bullish weather was likely to push prices back up towards resistance.
This came as overnight model guidance added additional cooling demand in the long-range, in line with our expectations.
Our intraday Note of the Day similarly identified that resistance would easily hold today, with prices unable to break above $2.969.
Afternoon model guidance remained quite hot as well, as though European guidance cooled a touch we saw American GEFS guidance trended even hotter, as seen below courtesy of the Penn State E-Wall.
The result was a small narrowing in N/Q after significant widening in the face of looser balances.
Traders are now preparing for tomorrow's EIA print, which will help confirm whether last week's bearish print was the new normal or the market has modestly tightened up since then. In our Afternoon Update we broke down today's price action, balance, and weather forecast to show how natural gas price risk is skewed into tomorrow's EIA report, and tomorrow will provide our final estimate and expectations for how prices trade around the print. Immediately following the print we will release our latest detailed weather-adjusted storage modeling that integrates our seasonal forecasting, allowing subscribers to see exactly how the EIA print changes our market assumptions moving forward. To give all this research a close look, try out a 10-day free trial here and see how we can help you navigate the natural gas market.
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Nuclear Power Generation Continues To Impress
Tuesday, June 19, 2018 at 5:23PM
One trend we have been closely monitoring at Bespoke Weather has been massive nuclear power generation thus far through 2018. Below we show how nuclear power plant outages through 2018 have been far below year-ago levels and similarly far below the 5-year average.
The result through 2018 thus far then has been far less natural gas being burned than usual to cover nuclear outages. Assuming all nuclear outages would have been replaced by natural gas power burns, we show the daily impact this impressive nuclear power generation has had on natural gas demand.
In the context of significant production growth over the past year and a half, this demand destruction has made recent balance loosening appear even more dramatic.
The result can often be days like today, when daily balances deteriorate dramatically and outweigh any incremental weather changes.
This can best be seen along the strip, where the worst losses on the day were actually X8-Z9 versus the prompt month July N8 contract.
This is why we track balance on a daily basis along with weather, in order to see weather's role in natural gas price action and whether incremental weather changes that we are expect or are observing will have a significant role on price. In our Morning Update today it was our balance reading that allowed us to see downside into support that was tested today even with neutral weather changes.
Each day we provide weather-adjusted versions of power burns that are also nuclear-adjusted, allowing subscribers to see the relative role of nuclear outages in current natural gas balance as well. To begin receiving this weather-adjusted balance data and analysis along with all our other natural gas-driven weather analysis, try out a 10-day free trial here.
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July To Start Hot, But Nat Gas Not Excited
Monday, June 18, 2018 at 4:48PM
Weather forecasts over the weekend were mostly mixed, with our Morning Update showing some cooler trends in the short-term and hotter trends in the long-term.
In our Pre-Close Update on Friday these were exactly the model changes we forecast over the weekend.
In fact, in our Morning Update the 6-10 and 8-14 day forecasts were both just a single GWDD higher than we had forecast they would be back on Friday, as we saw both the short-term cool and long-term hot trends play out.
Yet even with this heat July natural gas prices reversed off the $3.05 level they gapped up to last evening, which was the focus of our Friday Note of the Day.
That's what played out, and the July natural gas contract ended up settling down a couple percent on the day.
Natural gas traders are similarly still digesting a bearish EIA report last week that was quickly shaken off. Looking forward to this week's EIA print, Dominion Transmission (DTI) reported an injection that was the same as the past week at 10 bcf, indicating a similar injection in the East is likely to be announced.
We remain in a time of year where both weather and balance can play significant roles in price action; when they work in tandem we can see very significant price moves, and when they work against each other we tend to remain more range-bound. In all our research we break down the latest weather-adjusted balance data and weather forecasts to provide subscribers with a sense of each, ensuring they are aware of all fundamental drivers in the natural gas market. We integrate this with our analysis of the natural gas strip and spreads as well, providing a holistic view of the natural gas market overall. Try out a 10-day free trial here to give all that research a look.
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