The EIA was +39, which is bearish vs the survey average of +34 and is quite bearish vs history for a week with 99 HDDs for the EIA week ending last Thursday (11/8) though it is actually less bearish than the prior 3 weeks.
NG has been totally wacko the last few days and is largely in the hands of large fund controlling algorithms. It should never have risen as much as it did the last couple of days due to the high production.
Agree Larry,
But weather models just kept getting colder.......and we had a blow off top/exhaustion high yesterday............unless the models go back to extremely frigid looking, like yesterday.
Big warm changes over night, so down we go.
What will the next round of models show?
Mike,
Did you see Radiant's AM forecast? It is actually slightly colder in the 11-15 (and the 1-15 overall) as they're saying the models are not properly taking into account MJO progression and the -NAO/models have been too warm recently. Is your trial over? Did you sign up with them? What products did you get? You forgot to get back to me.
Hi Larry,
I'm getting their models page only, so that I can get the models lightning fast and also the European ensembles.
Sorry I didn't get back with you earlier Larry.
I'm starting chess at 5 schools this year(1 more than last). We had a little Winter storm here that I was updating folks on and............unfortunately it featured some icing on trees.
The huge weeping willow tree that I planted for our anniverary almost 2 decades ago, that had been leaning way over to one side to get sun, collapsed from the weight of the ice.
On the latest weather, it looks like mild, zonal Pacific flow from the southern stream is going to deflect the northern stream to the north from what previously looked like a very dominant -NAO, -AO............but that could change.
The models often under predict the strength of cold when there is a -NAO, -AO..........but its been going the other way for the last 3 model runs of the GFS and the other models, especially the Canadian model agree.
And so does the market....right now.
Fun times! It's been 4 years since there was anything like this action in gas.
Closing comments from Natural Gas Intelligence:
‘Irrational’ NatGas Futures Reverse on Milder Trends, Plump Storage Build; Big Price Spikes Out West
My comment is that because of very low storage, natural over reacted to the upside earlier this week, especially yesterday on mind boggling cold (on some of the Canadian model ensembles that brought the polar vortex all the way down to the US border with cross polar flow from Siberia streaming in) and an incredibly negative AO and NAO.
Then came back down to earth today when models took out the extreme nature of the solutions and in fact, a good many models are strongly leaning towards the mild camp.
The volume earlier this week was off the charts. It had to be an all time record on Tuesday, smashed big time on Wednesday. Today was not as high but was way up there.
A lot of long lived huge shorts in natural based on the increase in supplies which those in the know, have been positioning for by loading up on the short side. This is probably what suppressed the price this past Summer, when ng prices should have been well above $3 most of the time based on the very low amount in storage.
I believe they all got blown out of those positions this week........and we had a blow off, panic buying top with the covering of hundreds of thousands of short contracts.
It's possible, if the weather turns incredibly cold again that we could make new highs. Because its so early in the heating season, sustained, extreme cold like 5 Winters ago(when we went from close to the highest ng in storage to start and close to the lowest to end it) while starting with low storage this year (instead of very high storage) even if there's just a small chance of it happening..........is still possible enough early in the heating season, to prevent any aggressive shorts from stepping in to meet the aggressive buying.
That threat was for real earlier this week.............even if its just 2 or 3 weeks of extreme cold, if it continued, like 5 Winters ago, prices would be in the double digits.
$4.9 yesterday seemed insane, especially so quickly when we weren't much above $3 just 2 weeks ago.
Then we gapped higher a week ago Sunday night on this extreme cold...............that will be receding now.
The way the market is trading now, we can see a $2,000/contract move in a brief period on a model run that looks much colder after the previous one was mild(12z European model this after noon had several cold days in it) or vice versa.
A $9,000/contract range in prices the last 2 days.........first up from very cold, then down from much less cold.
Wow!
In case you're wondering, the limit move for natural gas is $15,000/contract!
More on that next.
http://www.wtrg.com/daily/gasprice.html
Maximum Daily Price Fluctuation
Natural Gas Futures: $1.50 per MMBtu ($15,000 per contract) for the first two months. Initial back month limits of $0.15 (15¢) per MMBtu rise to $0.30 (30¢) per MMBtu if the previous day's settlement price in any back month is at the $0.15 (15¢) limit. In the event of a $0.75 (75¢) per MMBtu move in either of the first two contract months, limits on all months become $0.75 per MMBtu in all months from the limit in place in the direction of the move.
When was the last time ng prices were this high? The price chart below does not have the current rally.
The chart below shows better the price spikes from 5 years ago during the Polar vortex outbreaks, in January 2014:
With storage so low, unless December ends up very mild and we catch up several hundred bcf, there is no reason to think that another polar vortex outbreak similar to 5 years ago would not potentially cause a similar spike higher.
The supply situation is clearly more bearish right now but the supplies gushing in can only restore the storage to safe levels slowly, one week at a time.
Repeating the frigid Winter of 5 years ago, gets storage to precariously low levels and the price spikes to the highest in over a decade. Based on the EIA projections and stats below, if we used up the same amount of gas this Winter, as we did 5 years ago, supplies would end up below 800 bcf(maybe not lower than that because extremely high prices would discourage some demand)!
Repeating the mild Winters of 2 and 3 years ago and storage catches all the way up with last year and prices get buried below $3 again by late Winter(with the huge amount of demand early this season, that means the catching up might take longer now, maybe early Spring? if the Winter is mild).
Right now EIA projects winter heating demand at about 6.6 TCF, and end of season inventories at 1.37 TCF on March 31st. Heating demand over the last 28 winters ranged from 5.7 TCF to 7.3 TCF, averaging 6.4. Here's the history from EIA:
Looking back at ng EIA stats, it looks like the last time that Natural Gas storage was lower than this for this week was in 2003, 15 years ago.
So who wants to hold a big position on the close tomorrow (-:
If NG were now opening, I'd think it would be sharply higher based on the 0Z GFS/Euro being much colder than the respective 12 Fri runs on a day by day comparison for weeks 1-2 overall. Is the upcoming week going to be as batshoot crazy as was last week? Or will natty calm down a bit. Stayed tuned for the next episode of "As the Gas Churns".
Looks like I might have to burn some wood this winter.
Othersise. Trading NG will be a daily event. Scalping if you prefer. But certainly not holding longer than a few days.
I'll be in Nashville all day and will probably only have time for a weather thread for Sunday in the morning but will check in for your comments and maybe have some.
I think that it will stay wild but especially if we have mixed signals on forecasts that swing strongly back and forth.