BWS Blog


Divergence Between Hotter Weather And Weaker Fundamentals Leaves Bulls And Bears Battling For Control In Natural Gas World

Tuesday, July 09, 2019 at 5:32PM


Since Friday's natural gas rally, prices have been stuck moving back and forth to start this week, thanks to opposing forces battling it out for market supremacy. The August contract closed a couple of cents higher today, after a slight down day yesterday.

natural gas commodity weather

In one corner, we have the weather pattern, which has shifted quite strongly to the hotter side over the last week or so, with widespread heat dominating the Midwest to East over the next couple of weeks.

natural gas commodity weather

As the chart on the bottom right shows, the increase in heat is enough to push the total July demand level to 3rd highest of all July months on record, behind only 2011 and 2012, now ranking even hotter than last July.

As bullish as that is, we are reminded that this is not winter, where weather alone can use natural gas as its own punching bag. This time of year requires at least some cooperation from the fundamentals side, and so far this week, the two sides are not being friendly to one another.

We've seen production make new all-time highs over the last several days, continuing its general up-trend.

natural gas commodity weather

Canadian imports also were back fully online last week, for the EIA report that will be released this Thursday.

natural gas commodity weather

The added supply aided in a pretty sizable build reported from DTI+TCO yesterday, indicating that this week's EIA number may reflect that supply / demand balances have turned back to the loose / weak side.

natural gas commodity weather

These factors have led to a stalemate, price wise, so far this week at the front of the natural gas curve as we wait to see which side blinks first. Can the hotter weather continue rolling into late July, perhaps even August? How much do we blame the holiday period last week for the weaker supply / demand balances? Our research can help provide answers to these key questions, providing guidance on which way the market is more likely to move next. Sign up for a 10-day free trial today to take a closer look at the suite of products we have to offer.