Wednesday, July 22, 2020 at 10:23PM
Prompt month natural gas prices have been stuck in a range for several months now, with the exception of a handful of days centered around the Tetco pipe explosion a couple months back, and the plunge around the expiration of the July contract last month. As the continuous prompt month chart shows, prices have generally been bound on the low side in the low 1.60s, and on the high side in the 1.90s. The main issue in the market remains whether or not we will have storage containment this Fall. As such, the market is searching for something that will offer clarity regarding which way the scales may tip. To be sure, supply / demand balances have tightened compared to a couple of months ago, but not enough to settle the issue. Production has actually ticked back somewhat higher from its lows several weeks ago. LNG volumes remain very low, though they, too, are off their lows. Weather has been the main bullish item so far this summer, and was starting to look like it could be lobbying to be the deciding factor, though has lost some of its punch. We had been projecting the hottest July on record in terms of total demand (measured by Gas-Weighted Degree Days, or GWDDs), but recent cooler changes have knocked it down a couple of notches to 3rd hottest, behind July 2011 and July 2012. Still, the pattern remains hot-leaning overall, with the entire country either near normal or hotter than normal. So, here we are, still in search of a clear sense of direction, playing in the same prompt month range. We are gradually drawing closer to "decision time", however, so constant monitoring of both weather and the background fundamentals data will be critical in determining where prices ultimately go. Staying in the range all the way through the end of injection season seems like the least likely path. Either we see a clearer case for containment issues, and the range breaks to the downside decisively, or we avoid it, offering a breakout to the upside. Our daily reports can keep you up to date on all of the factors important to the natural gas market, utilizing in-house proprietary modeling to project future storage paths based on a blend of weather and fundamentals. Sign up for a 10-day free trial here to take a closer look, and see what we are all about.
Tuesday, July 14, 2020 at 11:45AM
Natural gas prices have moved lower so far this week, likely the result of cooler changes in the weather forecast over the weekend. Our forecast yesterday showed a decline in just over 10 projected Gas-Weighted Degree Days (GWDDs) compared to Friday's forecast. In terms of natural gas usage, this change equates to roughly 15 to 18 bcf less demand over the next two weeks. The bulk of the change came in the near-term. The projected GWDD total for this week (ending 7/17) was once as high as 104 to 105, and now sits closer to 90 GWDDs. The forecast "held serve" overnight, failing to gain back any of the lost weekend demand. That said, the outlook is far from "cool", with above normal temperatures still widespread in this morning's forecast. In fact, despite the weekend change, we are still projecting that this month has a shot to edge out July 2011 for the highest July GWDD total on record. The moral of the story here is that, while the weekend change was bearish relative to the end of last week, this is hardly a "bearish" weather pattern, and new days rolling into the back of the forecast continue to be hotter than normal, which, all else being equal, should limit downside to prices, which actually are off this morning's lows by a few cents, gravitating right back to the middle of our long-running continuous prompt month trading range. From here, focus shifts more to where this week's EIA number will land, as well as upcoming trends in key variables such as production, LNG volumes, and power burns. The good news? We cover all of this as well in our reports, with our services utilizing a unique blend of weather and fundamentals in order to help shape a clearer market view. Sign up for a 10-day FREE trial here to see for yourself how our products can help keep you ahead of the volatile natural gas market.