Wednesday, September 04, 2019 at 8:50PM
Okay, so it is a little early for Christmas references, but we have entered the time of year where the natural gas world is often kind to the bulls, which is something that has not been the case very often since the big run up in the first part of last winter, as prices declined to new multi-year lows. Notice how prices often rise after the beginning of September. This year, we actually got a head start with some rallying last week off price levels below 2.20 in prompt month. That rally has continued unabated this week, so far, with prompt month prices touching 2.45 in today's session, more than 10% higher than we saw early last week. Surely, with a rally this strong, the data must have shifted pretty strongly over the last week. Well, not exactly. Production remains quite high, posting above 93 bcf / day on numerous days. How about LNG? We did see new highs last week, but so far this week, LNG intake has actually declined. The difference must lie in exports to Mexico, as they have been rumored to increase any time now, as the Sur de Texas pipeline comes into service. No, nothing notable there either. Quite simply, this has been a cash-led rally, as we are getting later in injection season and storage tries to fill as much as possible heading into the cold season, and prices had been held down at levels that are very difficult to sustain for quite awhile. We have been playing for this move for awhile, with suggestions such as buying the October / January (V/F) spread, along with selling puts showing up in our weekly trade ideas over the last several weeks. The V/F spread has rallied nearly 14 cents over the last month. We cannot leave weather out of the discussion, as we finally saw the expected shift hotter over the holiday weekend, with demand solidly above normal for the next couple of weeks across the south, doing its part to hinder storage refill efforts. Lastly, we must mention the large short position that the market has held for the last several weeks, adding more fuel to the bullish fire as some of these shorts are forced to cover on the way up. Is all of this enough to continue pushing prices even higher, or are we due to level off / pull back? Sign up for a 10-day free trial here to take a closer look at what our research suggests as we close out the warm season and look ahead to what is sure to be a volatile winter.