BWS Blog


Natural Gas Sell-Off Fails

Tuesday, November 20, 2018 at 5:03PM


Today's December natural gas contract trading range eclipsed that of yesterday as prices continued to whipsaw around. Prices initially were strong before selling off through the day and spiking right into the settle to close only a few percent below yesterday's settle.

natural gas commodity weather

The January contract led the way lower today, with strong physical prices helping the December contract minimize gains relative to later contracts. The April contract also got into much of the selling after it got in on the buying action yesterday.

natural gas commodity weather

Today was rather surprising for us, as in our Morning Update when prices were just below $4.5 we highlighted that, "if anything we still see risk a bit higher, though prices likely stay from $4.4-$4.7" thanks to "...significant long range cold risks..."

natural gas commodity weather

Initially our prediction worked very well, as the December natural gas contract shot up to $4.67 this morning, though prices began selling off on some cash weakness after. However, this selling intensified through the afternoon, with $4.4 being surprisingly broken later in the day even as afternoon GEFS guidance did not seem much warmer (image courtesy of Tropical Tidbits).

natural gas commodity weather

In our Note of the Day for subscribers we outlined that the strip was showing some bearish signals, and crude prices were hit very hard today, so it did not appear weather was the reason for the move lower. Sure enough, then, prices spiked very significantly into the settle to move right back into the middle of the $4.4-$4.7 range we had expected for the day, verifying our market view. This came as European model guidance confirmed long-range cold, with more cold in the medium-range too per the Climate Prediction Center.

natural gas commodity weather

Today for subscribers we also released our Seasonal Trader Report, where we look at our 5-month GWDD forecast and specifically looked at when long-range cold risks in December could break down. We also had our weekly subscriber live chat, where we looked at the latest weather pattern dynamics, risks to natural gas prices, and fielded questions from subscribers. We covered quite a bit, but one focus was the longevity of the upcoming -NAO regime.

natural gas commodity weather

Traders were also preparing for tomorrow's early EIA print, where a very large storage build is expected to be announced. In advance of it Dominion Transmission announced their largest storage draw since the week ending March 22nd.

natural gas commodity weather

We'll have another busy day tomorrow with our EIA Rapid Release to clients right after tomorrow's EIA print to put it in historical context. We'll also have our intraday Note of the Day looking at weather-adjusted balances and Morning and Afternoon Updates breaking down the latest weather model changes and pattern expectations. To give all this research a look and see how we can help you manage risk in this wild natural gas environment, try out a 10-day free trial here.