From Natural Gas Intelligence:

Tropical Storm Gordon Looms as October Natural Gas Called Lower

metmike: The main reason that we are much lower is the huge change in the week 1 cooling degree days.............. from widespread record heat in many places on Friday's forecast to much cooler than that on today's forecast. 

Storage is Very Low for this time of year!! This is why the temperature forecast matters. 

Storage is just below the  bottom of the previous 5 year range and also almost 700 bcf below last year at this time!

From last Thursday:   EIA storage +70 bcf  = bearish                                                                                                                                                                                                                                           

From Natural Gas Intelligence:

EIA Shocks With 70 Bcf Injection; Natural Gas Futures Too Stunned to React

    11:23 AM

Temperatures for that report below.............cooler than the previous report, so as predicted, the injection was larger than the previous +44 bcf!

Below is the temperature average for the 7 day period used for this next EIA storage report that comes out this Thursday at 9:30am. It's warmer than  the previous 7 day period. How much lower will the injection be because more ng was used to generate more AC cooling during this period?

Natural gas hit some tough resistance recently. Even the hottest of the hot forecasts couldn't push us to $3 with very low storage.

But storage is very low and we had record heat in the  forecast on Friday which gave us renewed strength on Friday.

Here on Tuesday, Temperatures for the next week are coming in  MUCH cooler than last Friday's forecast.

Natural gas 3 months

Naturalgas 1 year below

Naturalgas 5 years below

Naturalgas10years below

Seasonals based on historical prices. Often pretty strong at this time of  year.

Previous comments:

 By tjc - Aug. 20, 2018, 11:27 a.m.            

  Good morning, Forum

  NGas appears to have topped.

  Numerous %R sells, elevated RSI, cycle timing of a top was last week.

  I bought Sept 2.90 puts this morning.

  Expecting significant selloff.

  2 cents!

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                By Jim_M - Aug. 20, 2018, 1:30 p.m.            

You might be right.  But I'm holding long because this isn't a normal year.  To get to the EIA's projection is going to require some extremely strong injections of 80 bcf a week over the next 12 weeks.  I just don't see it happening.  The only way I see it happening is if the gas companies have had a hand on the valve, metering out flow and now they are going to open it up.  

When was the last time NG averaged 80 bcf over 12 weeks?  

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                By WxFollower - Aug. 20, 2018, 4:13 p.m.            

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Jim,

- The last time was 2015, which averaged 80/week for those 12 weeks. However, the upcoming 3 weeks in 2015 (mid to late Aug.) averaged ~22/week higher than what I'm projecting for 2018.

- 2014 averaged 92/week. However, the upcomingt 3 weeks in 2015 averaged ~33/week higher than what I'm projecting for 2018. Also, the balance was much looser then vs now. So, 92/week isn't happening.

- 2013 averaged 67/week. This is probably a more reasonable guess for 2018 at this stage as balance is similar now.

- 2012 averaged only 56/week but the balance was tighter. So, I don't see it being this low.

- 2011 averaged 83/week, but the upcoming 3 weeks in 2011 averaged ~15/week higher than what I'm projecting for 2018.

- 2010 averaged 69/week. This is probably a more reasonable guess for 2018 at this stage as balance is similar now.

- 2016 (59/week) and 2017 (57/week) had tighter balances. So they're too low to be good analogs.

 In conclusion, an average of 65-70/week for the next 12 weeks is my current best guess, which would get storage to near 3,200 bcf. Lingering heat into early Sep as well as early chill in October could lower this.

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                By Jim_M - Aug. 21, 2018, 10:55 a.m.            

Good stuff!  Thanks for the information.  I didn't really expect it, but it is enlightening.  Who knows, maybe the EIA knows something we don't for them to have such a strong projection for the next 3 months.  

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                By WxFollower - Aug. 21, 2018, 4:34 p.m.            

 NG was up early on warmer early morning 2 week model/forecast consensus, especially mid to late week 2 (8/31-9/4). The near record warm last week of August remains, which still means only a relatively small injection then. Now with the warmth increasing for early Sep., the chances of a large injection in the subsequent report are dropping though it almost surely would be a good bit larger than the prior one due to Labor Day related demand slowdowns, alone.

 Most of the day saw it going back and forth with no clear direction though it was always solidly in the positive for the day. Later, it rose to new highs after 12Z model consensus reaffirmed the strong warmth acoming.

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                By tjc - Aug. 22, 2018, 11:22 a.m.            

  And I "pre"forecast it!!  LOL

  Holding puts

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     Started by Jim_M - Aug. 23, 2018, 2:07 p.m.

Today's NG was close to what was projected by analysts.  Taking the EIA's projection that an average of 80 BCF is going to get put into storage over a 12 week period, todays 48 BCF now means that the average needs to be just about 83 BCF for the remaining 11 weeks.  

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                                    By metmike - Aug. 23, 2018, 2:44 p.m.            

           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?

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                     By Jim_M - Aug. 23, 2018, 3:27 p.m.            

            Place your bets!  

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                By WxFollower - Aug. 23, 2018, 8:35 p.m.            

            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. 

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               By tjc - Aug. 24, 2018, 11:43 a.m.            

  As of 1041 cst, N Gas has a weekly reversal.

  Unless it breaks below 290, my 2 puts will expire worthless even though it may end up a reversal week.

  I made my bet---hope a lot of stops 290

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                                            By metmike - Aug. 24, 2018, 12:26 p.m.            

tjc,

That's the huge problem with being long options in the futures markets.

Something like 90%+ expire worthless because the premium is so great, as you are charged for taking on only the risk of what you paid for it...........and not more than that.

The person that sells it to you is taking on the unlimited risk.....of course you know that.

They can afford to be wrong about the price direction and still collect the entire amount that you paid them.............just  as long as they are not wrong by more than a certain amount. 

I don't know what the price of NGU was when you bought the puts but its lower now. 

However...........it's natural gas and has not responded very well to bullish news. It could NOT take out resistance with the hottest of hot forecasts. 

When a market stops reacting positively to  to extremely bullish fundamental information............ As I mentioned yesterday, "What will happen if the forecasts cool off?"

We are finding that out today!

                By metmike - Aug. 24, 2018, 1:20 p.m.            

Special Weather update below:

The last 12z GFS operational model is a bit cooler yet, with the cool intrusion from Canada next week. This is the reason for natural gas to be sharply lower today.

Then it breaks down the heat ridge for the East and Midwest late in week :

Day 5 below, then day 15 below that:

gfs_namer_120_200_wnd_ht	gfs_namer_120_500_vort_ht
gfs_namer_120_1000_500_thick	gfs_namer_120_850_temp_ht

gfs_namer_360_200_wnd_ht	gfs_namer_360_500_vort_ht
gfs_namer_360_1000_500_thick	gfs_namer_360_850_temp_ht

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                By tjc - Aug. 24, 2018, 2:16 p.m.            

              Wow---checked with account rep---ngas options expire the 28th, not 24th.

  Oh for the gap and drop Monday!

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                By metmike - Aug. 24, 2018, 2:28 p.m.            

                                        You could be in the big money next week if we come in with the heat ridge no longer in the forecast!

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                By tjc - Aug. 27, 2018, 10:37 a.m.            

  What is your weather forecast?

  One more day?

  Can Sept breach 285?

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                By metmike - Aug. 27, 2018, 2:17 p.m.            

To answer your question about NGU going below 2.85.

I have no idea.  NGU expires in 2 days. We have very low storage, which should keep the bottom from falling out but spikes up and down have been common just before expiration. 

The near term forecast still has some heat but the middle of the month has turned much cooler. 

But we have already dropped from just below 3.0 from cooler forecasts dialing in lower prices.  Will a continuation of cooler forecast keep pressure on prices? Or will this serve as support because of low storage?

I can often tell you what is going to cause the next move up or down in ng based on changing weather..........even if its for just that day but with NGU expiring and already dropping hard from last weeks highs, am not venturing even a guess for the rest of the day and tomorrow.

As mentioned last week, this is the price that you pay in buying options. You have to be right big to make money. That still might happen but if we sell off a great deal from last weeks highs but not quite enough for you to make money on your put option, it will leave you very bummed out...............even much worse then if we were above $3 right now and you were thinking(thank God I bought puts and didn't lose even more money).

Instead of (I was right and knew natural gas would do this but still didn't make money)

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                By tjc - Aug. 29, 2018, 8:53 a.m.            

Final Tally

10-- 85 puts expired worthless--cost with commission 1100

 5---90 puts bot at 28 sold out at 48 --one by option trade--4 by offset futures

Net result is I had to pay commissions!

Bought when gas near 294--the next two days tested 298.  Then somewhat dramatic drop started.

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                By metmike - Aug. 29, 2018, 9:44 a.m.            

Thanks very much tjc for sharing your trade with us. You were dead right about natural gas!

            Most recent comments:

                Re: Natural Gas Friday            

                By WxFollower - Aug. 31, 2018, 11:31 a.m.            

 I am amazed at how warm the forecasts are for the next 15 days for the US as a whole and for the NE/Midwest especially. Some areas in the Midwest/NE are as much as 8-9 warmer than normal!

 Going back to 1950 on a nationally degree day population weighted basis, one forecast I saw is for record warmth by about 1 degree/day averaged out vs the current record warm holder of 2015 and which is about as warm as the 30 year normal for the climo warmest part of the year, July!! This is why NG has been so strong after the solidly bearish EIA of +70. With that largely already dialed in just in advance of it and record heat ahead of it in combo with the lowest storage since 2003, it is not a surprise that NG was as high this morning as over 6 cents higher than the price just before the +70 was released and 9 cents higher than where it briefly dipped to immediately after the release. So, the upcoming 3 injections are looking to be close to what would be expected with normal temps for July with the exception of the lowered demand related to Labor Day. That will only hold back from the very large injections there might have been to really help the storage deficit recover on the backs of supposedly record production and is why NG has been so strong for over 24 hours.

 This also tells me that the forecasted E US ridging could easily be in record strong territory going back to 1950 when looking at 8/31-9/14 as a whole. This would mean the Joe Bastardi “ridge over troubled waters” pattern  in overdrive should it verify and merits a very close eye on any tropical cyclone that happens to be located not too far off the SE US coast as it would be in a potentially threatening position to move WNW or NW into the SE US.

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                By metmike - Aug. 31, 2018, 12:09 p.m.            

Thanks Larry!

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                           By WxFollower - Sept. 2, 2018, 2:10 a.m.            

 You're welcome, Mike. Since I wrote that Friday, my impression is that models have cooled a fair bit, especially for 9/6+. I have to wonder if this is change in projected typhoon track related since Friday.

 I realize that it isn't shocking to go from about the warmest on record for the first half of Sep to something cooler (if it was going to change, one would have to expect cooler, not warmer).

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                By metmike - Sept. 2, 2018, 10:16 a.m.            

The cooling that you noted Larry has exactly been my impression too, especially with the 18z GFS yesterday and afterward. 

The amount of cooling on operational GFS recently looks overdone but its almost impossible to maintain a massive heat ridge in the East for weeks straight in September.

During  J-J-A........yes but Sept is much tougher.

 I agree, Mike, that cooler week 1 is the main reason for the price drop vs Friday. Some of this is probably related to Gordon.

 The cooling is not at all a surprise since Friday’s forecasts were record breaking back to 1950 for nationally weighted CDDs. Further warming would have been the real surprise.

 I have read about GOM shutins, but have yet to see total numbers.

  (RE)shorted on Friday at 285.4.  Sweated it out until the open Sunday night--huge drop.

  Two equal legs down is 77ish--- may provide support??

Congrats tjc,

We took out last weeks lows of 2.830 today. The week 1 weather models have kept getting cooler and cooler and cooler the last few days. Temperatures on some days that were forecasted to be at record heat from last Friday, are coming in close to average for todays outlook.

It looks like it will get hot again after this week but its probably just too late in the season for heat to make a difference..........even with low storage. I guess "hot" in late September is more like "very warm".

In October, cold weather will potentially be more bullish than very warm weather.  Heat waves can still use up some extra electricity for cooling but the market can shrug it off as short lived/insignificant in the big picture.

From Natural Gas Intelligence:

Gordon Seen Destroying Demand as Natural Gas Futures Down Sharply; East Coast Cash Strengthens

     5:49 PM    

Possible demand destruction from a storm along the Gulf Coast and surging Lower 48 production helped drive heavy selling for natural gas futures over the holiday weekend and into Tuesday’s session. Spot prices were mixed as East Coast locations continued to climb on strong September heat; the NGI National Spot Gas Average picked up 13 cents to $2.81/MMBtu.

This is the EURO Ensemble for the 7 day temperature anomaly for Sept 15th through the 22nd.  Much of the country averaging 2 to 4 degrees Celsius above average. Still above average but by this time average highs are cooler so I'm thinking this would not be very bearish. Looking out even longer the euro ensembles keep the U.S. slightly above average until early October when most of the country will be near average. But my experience tells me after two weeks the forecast is extremely low confidence. 

Last sentence should be after two weeks..

Sorry, just found the edit button. Is there a way to delete this? 

Thanks Grant!

I forgot to look at the 768 hour(monthly) European model last evening, since it seemed like a Sunday instead of Monday(when its updated, as well as on Thursdays).

You are correct also about how the market will view weather beyond 2 weeks, although Larry and I have had one of our rare, slight disagreements about how the market viewed a few week 3-4 forecasts in the past.

I have seen the market under unique circumstances trade strongly off of weeks 3-4 if:

1. It was a key time frame (like mid Winter for ng)

2. It was extreme(widespread and near record type event) 

3. Additional factors did not oppose this

I think Larry made the case that these forecasts were actually worse than just using persistence or the average for those dates. I agree with that in general but under some situations, I think they are better than that. 

What do you think of the CFS week 3 and 4 outlooks for instance?

I provide them here, not really as a useful tool that the market trades(which is rarely) but more for entertainment purposes.

"Last sentence should be after two weeks..

Sorry, just found the edit button. Is there a way to delete this?" 

I think that you have the option to edit and delete, though it might appear different on the moderators screen. I can always delete anything that you want.

That option is one of the nice things about the forum.

Actually, I go to great lengths to  post everything from scratch each day.........and try to reword the descriptions to apply when I can. As you know, the NWS and other links/sites will update maps automatically, with each model run or forecast. 

However, a downside of keeping the previous days, with the old descriptions of those same, constantly updating maps is that the previous descriptions remain from those previous days but the new maps keep updating............so the descriptions no longer match the maps.

In many cases, I would not want to freeze an image and keep it there permanently...........like with a radar image.

If I post the updated radar image at 9am, for instance, I wouldn't want somebody to tune in at 1pm and see something 4 hours old. 

The 12z guidance will not update until the next day when the same model run for 12z replaces it.

The NWS precip maps at the top of the page update twice daily and changes might happen several hours after I posted my morning discussion but I leave it be, even if the afternoon update would change.

If desired, I can adjust things with maps/statements later on down the page.............otherwise, one thing that might happen is that the intial post is stamped with the earlier time and the statements/changes later would come off as being made at that earlier time. 

From the get go, Larry made is clear that he didn't think this should  happen on posts from anybody.....people changing things AFTER the fact. 

Have never had an issue and don't expect any but somebody could predict something........price move or market move or weather event and when it busts, just delete it or change it to make themselves look better.

It's perfectly fine for you to delete what you want and edit what you want and when you want. I do it contstantly, usually to add stuff that I forgot to state or change something that I forgot to change(like the day of the week) and a lot to fix spelling/grammer snafu's. 

I like the look at all of them and most do a good job forecasting pattern changes, two weeks out, sometimes more. I think after two weeks it can be used as a"heads up" to what could come, but don't bet on it. If everything lines up with teleconnections then I put more weight on longer range ensembles. 

I like to compare the ensembles with the analogs to get a really good idea of what will happen. Worked great last fall with our first freeze and last winter when we were able to see sub zero temps in our DMA 2 weeks out. But after two weeks I have not had much success. On a different note, the CFS seems to do a good job looking in on potential major severe weather events. 

Grant,

You will read comments by Natural Gas Intelligence at the end of the day and also in the morning with their take on why the market acted a certain way that day or why its going to open a certain way. I'm not sure what their sources for this information are. 

More often than not, they get it right. Sometimes they will comment that the market acted differently than one would have thought based on whatever was out there that they know about........or what traders told them about. 

Sometimes they get it wrong or are off and I will comment about that when I know with confidence that they are wrong. 

Natural gas doesn't always react to the weather. There are numerous instances where other factors are more important. However, residential heating and cooling demand changes are the factor that can always make the biggest changes in storage on short term basis............so the market really pays attention to changes in the temperature forecast.

The Midwest and East high population centers are the most important because they use up the most natural gas.

The south and Texas can use up quite a bit, especially with an extreme cold wave in the Winter. 

The Plains(outside of TX and Rockies don't matter). There are several high population areas on the West Coast and Larry could probably tell you exactly how much they count but as you know because of teleconnections, they often get the exact opposite weather as the Midwest and East. 

So, for instance, if they are having record warmth in January from a big upper level ridge that extends well into Northwest Canada, which is bearish for HDD's out there but downstream, we have an upper level trough and cold air masses coming down from high latitudes, it won't matter how bearish the warmth is out West, the cold in the East will be much more important by a wide margin and viewed as being very bullish...........depending on how cold. 

The same pattern is july/August would be bearish because of  CDD considerations.

1. Welcome, Grant!

2. As Mike said, he and I are largely in agreement with regard to the very low skill in looking past 2 weeks and on the idea that it almost always takes a back seat to changes that go in the opposite direction within 2 weeks since there’s much higher skill during the first 2 weeks. Even as early as week 2 there are often significant changes from day to day due to the inherent lack of certainty of even the ensemble means. Heck, even sometimes week 1 can have large changes as it did just the last few days! So, if even the 1st week is sometimes susceptible and the 2nd week often susceptible to significant changes, how susceptible would week 3 be? And even much more susceptible than week 3 in week 4. If on a particular day the 1st 2 weeks are unusually stable/relatively high confidence with little daily change and the 1st 2 weeks of wx are already dialed in, only then do I think the market might sometimes consider using the 3 week ensemble projections to be its primary wx influence of the day.

3. The NG shut-ins for today were only near 0.25 bcf. Tomorrow’s may be a little higher. The total is now looking to be under 2 and maybe under 1 bcf.