Tuesday, January 21, 2020 at 11:42AM
Warm weather continues to take a heavy toll on the natural gas market, with the long weekend bringing even more changes to the warmer side, enough so that, on a Gas-Weighted Degree Day (GWDD) basis, we are now projecting this January to be the 3rd warmest in our historical dataset, behind only 2006 and 1990. The pattern has a very "El Niño-like" look, which without any high-latitude blocking leads to warmth across most of the U.S. outside of parts of the South. Despite the historically low price environment, it is difficult to avoid moving even lower with a high-level warm pattern in the middle of winter. We hit on these points in our "Pre-Close Update" sent out to clients Friday afternoon, taking a slightly bearish stance into the weekend despite Friday's close being almost dead on $2.00 in mid-January with a market that is already heavily short, citing the likelihood of continued warmth taking us lower. So far, that is exactly what has happened, with prompt month prices currently down in the low $1.90s. All the while, we continue to see production well under the highs from late November, which along with stronger weather-adjusted power burns has helped tighten supply demand balances. In a "normal" scenario, this would be increasingly bullish, but this weather pattern is, as shown above, anything but normal, and will continue to rule price action as long as it stays biased strongly to the warmer side of normal. Can the run of warmth continue well into February, or will we finally see things change enough to stop the natural gas price plunge? We track both weather and fundamentals closely in our daily reports, providing a unique blend of data to present a clearly view of future price action. Sign up for a 10-day FREE trial here if you are an active trader in the natural gas market, and would like to take a closer look at our products and research.
Thursday, January 02, 2020 at 12:53PM
The turn of the new year did nothing to stop the downward move in natural gas prices, with the prompt month February contract currently down nearly 6 cents as of this writing. It is not too difficult to see why when taking a look at the latest weather forecast maps. That is a lot of warmth at typically our coldest time of the year, not good if looking for above normal natural gas demand, as our forecast Gas-Weighted Degree Day (GWDD) chart shows relative to normal. It is for this reason that we alerted clients in our early morning report that risks to prices were still to the downside despite the already very low price environment, taking a "slightly bearish" stance for the day. This worked out well so far, as prompt month prices have fallen 5 cents since the report was issued. While weather wins at this time of the year, it is interesting that we still are seeing production at levels well under the high set in late November. This decline is keeping supply / demand balances tighter, which will become important if the weather is able to shift out of this very warm mode, even if only to a more "normal" background state. As such, it is still quite important to keep track of the latest trends. Our suite of products can help the active trader stay ahead of changing market conditions to capitalize on price moves. Sign up for a 10-day FREE trial here to take a closer look at what we have to offer.