Jim,

I agree with you that we will not make the projection that you mentioned.

However, the market is looking well beyond that time frame.

If supplies hit as projected and injections grow accordingly, this will also cause smaller withdrawals in the heating season.

We will never get close to the 5 year average before the end of the injection season but if the market thinks that we're just delaying that by X number of weeks because of the current heat, it can just trade the same things but push them off farther down the road because the market knows that CDD's are not a permanent market dynamic.

Every September, there are less CDD's, then even less in October as HDD's become important and CDD's can turn bearish if they mean a pattern that causes much less HDD's.

We are surely still trading CDD's here but September, even with record heat and low storage at this time of year is not a month with weather even capable of using up alot of electricity to generate natural gas........or October compared to record heat in June-July-August..........or record cold in the prime HDD season.

This is one of the biggest reasons for us to be unable to break out to the upside.

If we come in with record heat next week and a forecast for another week of record heat on top of what we have now, I will guess that we have a shot to clear $3 but it seems like the forecasts are about as hot as they can get the last several days and we were unable to get to $3.

What will happen if the forecasts cool off?

Place your bets!  

metmike said:

"Jim,

I agree with you that we will not make the projection that you mentioned.

However, the market is looking well beyond that time frame.

If supplies hit as projected and injections grow accordingly, this will also cause smaller withdrawals in the heating season.

We will never get close to the 5 year average before the end of the injection season but if the market thinks that we're just delaying that by X number of weeks because of the current heat, it can just trade the same things but push them off farther down the road because the market knows that CDD's are not a permanent market dynamic.

Every September, there are less CDD's, then even less in October as HDD's become important and CDD's can turn bearish if they mean a pattern that causes much less HDD's.

We are surely still trading CDD's here but September, even with record heat and low storage at this time of year is not a month with weather even capable of using up alot of electricity to generate natural gas........or October compared to record heat in June-July-August..........or record cold in the prime HDD season."

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Mike,

 For months we've been hearing about increased supply resulting in storage that will increase substantially relative to 5 year averages as well as last year.  Yada, yada, yada. Yes , the heat of May/summer and chill in April have made that more difficult. But even after taking into account the increased HDD in April and CDD May-August, it still isn't evident that we have much of a, if any,  looser supply/demand balance than the five year average balance. Yes, we've been mainly bearish vs 2017 and 2016. But 2017 and 2016 were tight years with high storage, especially 2016. So, that's not at all surprising with 2018 storage being way, way lower.  But vs the past 5/15 years, it has been much more neutral. Here is how the bearish vs expectations +33 of last week compared on a CDD equivalent basis:

- bearish vs 2017, 16, 12, 07, 06

- neutral vs 2015, 13, 10, 09, 05

- bullish vs 2014, 11, 08, 04, 03

  So, on a longterm basis, it was actually neutral rater than bearish. 

  Wx permitting (a big if if we don't end up having a cold winter), the current balance should help lower the deficit vs last year. But this is not how a deficit vs five or 15 year averages is made up with it being neutral overall to 5/15 year average supply/demand balance. And that's not even assuming a cold winter. So, I'm not sure I'm buying all of what I read regarding increased production being more than enough to counter increased demand per DD/exports.

  No, CDDs aren't permanant and never are just like HDDs are never permanent. But they can still have a significant impact even into early Sep. And the market typically as you said is still looking at them as they're still way, way higher than HDD into early Sep. Granted, by the time we get into early Sep., the chance for a very small injection similar to midsummer is very low. However, the chance for a very large one normally increases then. Very late heat may not result in a tiny injection, but at the same time it may mean no very large one either. In other words, CDDs normally still have significant impact on demand even into early Sep. Getting a medium sized instead of large injection has as much bullish impact on storage as getting a small injection vs a medium sized one. Every extra bit of heat just means that much less storage come November 1.

 As you noted, increased CDDs changes from bullish to bearish as we approach the end of Sep./early Oct, especially if those increased CDDs are in the northern US. On a national basis, normal HDDs overtake normal CDDs within a few days of Oct. 1.