NG Volitile both directions
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Started by tjc - Jan. 15, 2019, 8:39 a.m.

Good morning, Forum

NG continued higher from the reopen Monday evening, topping near 2am, then fell, going negative, until a snap back at 8am.  (Is not lasting very long)

MetMike should be able to confirm the first hint of cold abatement OR NG ran out of buyers(momentum).

Comments
By tjc - Jan. 15, 2019, 10:51 a.m.
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New low on the day.   Feb approached 50% retracement!

Weather must be revising

By metmike - Jan. 15, 2019, 1:45 p.m.
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Sorry for not responding earlier tjc,

I think the we way overdid it on the upside and the GFS products just got so extremely cold by late yesterday, each run causing a new bump higher, that it became impossible to feed that pattern with a solution that was even cold.

See the weather post from Craig S. in the weather thread.

Are the highs in? 

Some models are morphing milder from the most extreme cold possible but you would expect that because they can't get colder.

This does not mean the very cold pattern will not happen or that it cant last for a few weeks and support natural gas to new highs.

However, if we keep adding LESS cold to updates(the GFS operational did this as well as the Canadian ensemble but the ensembles were still very cold) then the highs are solidly in.

By metmike - Jan. 15, 2019, 8:14 p.m.
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Closing comments from Natural Gas Intelligence:

Natural Gas Bulls Take Breather as Forecasts Moderate; Cash Rises Ahead of Cold Shift

     6:27 PM    

After a furious rally to start the week, natural gas futures bulls took a breather Tuesday as the latest forecasts eased cold expectations somewhat. With markets zeroed in on the prospect of a shift to frigid temperatures starting this weekend, spot prices gained across most regions; the NGISpot Gas National Avg.finished 16.5 cents higher at $3.730/MMBtu

By tjc - Jan. 16, 2019, 1:57 p.m.
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NG in a selloff.  Will tomorrow gap lower creating a 3 day island?

By metmike - Jan. 16, 2019, 2:45 p.m.
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Probably not because we will have enough continuous trading with the exception of ng being closed for an hour between 4-5pm this afternoon.

Here's the  latest weather for natural gas. As mentioned earlier, the 12z models all came out milder. The GFS and Canadian ensembles MUCH milder.



https://www.marketforum.com/forum/topic/21800/

By metmike - Jan. 16, 2019, 2:48 p.m.
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The European ensembles are coming in  a bit colder than the other models but still slightly milder than the previous solution, so that may stop the slide lower.

By metmike - Jan. 16, 2019, 7:50 p.m.
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18z operational GFS is just the opposite of the 12z model and MUCH colder.

The GFS ensembles were about the same but with a MUCH colder end of week 2, which is the key period right now.

What happens then will either cause the upcoming cold to be short lived and bearish or keep it going/sustain it well into February........potentially bullish.


By metmike - Jan. 16, 2019, 7:52 p.m.
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From Natural Gas Intelligence:


Blustery Winter Muscles In, Knocking Out Mild Conditions, Says Forecaster

       4:47 PM

Polar Vortex Forecast Not Impressing Natural Gas Futures; Cash Continues Climb

     5:32 PM    

Forecasters say intense polar vortex-influenced cold is on the way, but a restless natural gas futures market appeared unsatisfied with the upcoming pattern Wednesday, selling off for a second straight session after a sharp rally to start the week.

By tjc - Jan. 17, 2019, 2:34 p.m.
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  Once again NG could not hold early gains.  Now near unchaged, UNG (etf) now negative.

  Perhaps into gap tomorrow and gap lower Sunday night leaving an island??

By WxFollower - Jan. 17, 2019, 3:43 p.m.
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Mike,

 From what I've seen, the 12Z non-CDN consensus is a decent bit less cold for the 2 week period vs 0Z. Still quite cold....make no mistake about it...but not a cold as the 0Z, which had been dialed in, especially the somewhat colder 0Z Euro ens vs the prior runs.

By metmike - Jan. 17, 2019, 8:07 p.m.
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Thanks,

The 12z operational GFS and EURO were quite a bit milder(less cold).

The ensembles just a tad less cold.


The updated 768 hour European model is very cold during the first half of February, with 2 especially frigid air masses hitting during that period. 

Maybe that helped support ng shortly after the open this evening.

By metmike - Jan. 17, 2019, 8:11 p.m.
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Closing comments from NGI:

Natural Gas Futures Fail to Hold Rally as Models Ease Demand Expectations

     5:32 PM    

An underwhelming storage withdrawal and mixed signals from the latest forecasts saw natural gas futures retreat from a morning rally to finish a few pennies higher Thursday. In the spot market, points across the country moderated after widespread gains earlier in the week; the NGI Spot Gas National Avg. dipped 33.0 cents to $3.765/MMBtu

By metmike - Jan. 18, 2019, 12:42 p.m.
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Congrats so far on your beans and maybe natural gas tjc.

Weather models overnight were much milder at the end of week 2. If this trend continues, we could be sharply lower next week.

We closed part of the gap higher from Sunday Night when we dropped to 3.201 this morning.

The gap is now from there, down to the high of last Friday of 3.166.

Weather in South America is actually a bit bullish beans and I think there's already been alot of damage.


The GFS turns milder but the 12z GFS ensembles has a much stronger frigid blast hitting before it turns milder at the end of 2 weeks..........which caused this late morning pop higher.


By tjc - Jan. 18, 2019, 1:01 p.m.
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TY for the kind words.

Torn between taking a profit on the put and gambling another weekend of weather forecasts.  However, the 'script' I wrote has been followed to a tee---rally to tu/wed/thur, then down.  Tu was high.  I projected a low at expiration.  So, I stay with put---besides rolling only results in more premium paid.

Still think beans have a shot at 960

Is KC being influenced by lack of rain?  Bot a contract yesterday after missing buy wed by a dime

By metmike - Jan. 18, 2019, 1:41 p.m.
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Yes on KC

On ng, the Canadian ensembles came out colder too and so is the current Euro.

By tjc - Jan. 18, 2019, 1:48 p.m.
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  Did NOT want a cold forecast, but how can you disappoint the bull without one?

Must have been 'darn' cold, ng has had a significant rally!

  Is there another run of forecasts before 4 pm est??

By metmike - Jan. 18, 2019, 2 p.m.
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The good news is that if this last extreme far south, OUTLIER solution for the polar vortex verifies on the EURO, florida will have a hard freeze and oj will take off next week.


IF

By WxFollower - Jan. 18, 2019, 2:10 p.m.
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 ALL models significantly colder 6-15 day period at 12Z vs 0Z! Therefore, NG has risen sharply to go up for the day.

By tjc - Jan. 18, 2019, 2:13 p.m.
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TY MetMike and Larry.

Typical weather market---buy dips, sell gap highers.

By tjc - Jan. 18, 2019, 3:54 p.m.
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3:55 est---forecasts changing to milder??

By WxFollower - Jan. 18, 2019, 4:21 p.m.
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tjc,

 Not at all. Since I wrote that, the Euro ensemble also came in significantly colder than its 0Z version and lead to the highest of the day. I'm guessing this was largely profit taking at the end of a pretty strong up week.


Summary of 12Z vs 0Z in HDDs:

12Z GFS (volatile, especially in week 2): +24

12z GEFS: +24

12Z Euro: +12

12Z Euro ens: +13




By tjc - Jan. 18, 2019, 4:46 p.m.
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Many thanks----have a good weekend!

Would appreciate a sunday afternoon weather guidance!

By WxFollower - Jan. 18, 2019, 5:24 p.m.
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You're welcome. I don't make trade recommendations normally, but going long late after that pullback (which I'm guessing was largely profit taking of longs before longs weekend as opposed to warmer models) with as cold as the model consensus became might have been a good enough risk to reward relationship to go long.


*Corrected for typo*

By WxFollower - Jan. 18, 2019, 6:44 p.m.
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Typo above. It has been corrected. Gist: risk/reward to go long over weekend after that late pullback imo was good because all 6-15 day models significantly colder than 0Z and very cold. The pullback was imo mainly end of week profit-taking by longs, who had a good week, rather than from any warmer model since they were all colder. We will see.

By metmike - Jan. 18, 2019, 7:11 p.m.
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Thanks Larry!

Agree on the colder to much colder models dominating thru the close.

After the close, the GFS operational model came out MUCH colder vs its slightly colder 12z run. The GFS ensembles were also much colder on top of their 12z much colder run.


The main item driving the increase in the cold is how far south the center of the polar vortex is going to drop south. This last GFS takes it all the way into Michigan. Thats pretty far south but the 12z European model, incredibly, drops it all the way down to the Ohio River!

Anything close to that and Florida will have a serious freeze threat. 

It looks like the morning of January 28th will have the coldest temps in FL.


Thats still 10 days from now, so alot can happen and conditions for a damaging freeze to the orange groves have to line up just right, with north winds parallel to the coasts needed, along with clear skies, even after the very cold air is dragged that far south.

Would guess that we could have another price gap on Sunday Night.........higher again if the models don't change much.

This might be the coldest air mass for some places in a long time.


Closing comments from NGI:

      

Natural Gas Futures Rebound as Colder Risks Seen Rolling Forward; East Coast Cash Spikes

     6:31 PM    

Another up-and-down session in the natural gas futures market ended favorably for the bulls Friday, with some colder trends in the latest weather models helping to spark a rebound from overnight and early morning selling

By metmike - Jan. 18, 2019, 7:35 p.m.
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Just to be clear on the OJ freeze threat. We would need something as extreme as the 12z European model to cause a major damaging freeze.


Also, the sharply lower overnight/early morning ng prices were because the late week 2 pattern looked like the cold was going to really start moderating and the polar vortex, retreat back north, with Pacific flow possibly taking control.

The 12z morning runs, instead, early in week 2 had the polar vortex plunging MUCH farther south, some south of the Canadian border.

Considering the strongly negative AO, its not a shock to see the polar vortex come very far south and for the models to struggle to capture this. 

By WxFollower - Jan. 19, 2019, 4:17 p.m.
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I said yesterday:


" Summary of 12Z vs 0Z in HDDs:

12Z GFS (volatile, especially in week 2): +24

12z GEFS: +24

12Z Euro: +12

12Z Euro ens: +13

------------------------------------------------------------


Today's 12Z vs yest.'s 12Z in HDDs:

12Z GEFS: -3

12Z EPS: -2

 So, a very slight loss but still holding onto the majority of the gains from 12Z yest vs yest 0Z. So, today's 12Z GEFS is still +21 and today's 12Z EPS is still +11 vs yesterday's 0Z runs, which are what helped determine the Fri AM forecasts at major firms. So, as of now, the Mon PM forecasts are likely leaning colder than Fri AM but we still have a very long way to go to get there. Of course, the market will still trade Sun eve even without these firms' forecasts. So, the Sun 12Z runs will be an important run.


 Now backtracking even further, Fri 0Z vs Thu 0Z:

GEFS: -25

EPS: -13

 Thus, Fri AM forecasts were sig warmer and the market tanked in the AM before the sig colder 12Z runs brought NG back up to the general vicinity of THU PM levels. 


So, where are Sat 12Z runs vs Thu 0Z runs?

GEFS: ~ -4

EPS: ~ -2 


 THU AM prices were averaging ~3.55 prior to the EIA. So perhaps the low 3.4's are near the bottom for now IF models/forecasts don't turn sig warmer from today's 12Z meaning the pullback late Fri from high 3.4s to the low 3.4s may have been a good place to consider longs. Of course, I'm likely analyzing this much too scientifically.

By metmike - Jan. 19, 2019, 4:41 p.m.
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Larry,

This is one outstanding way to analyze it and when you do it scientifically, its always objective(using the stats/scientific method)

I will add a couple of things. I think that a very cold period coming up is obviously dialed in and smaller HDD's don't matter as much during that period as does..........whether this cold pattern continues or we have the polar vortex retreating and milder Pacific flow undercutting.

Now that we've almost caught up with last year(at a record clip) we can have a couple of extremely cold weeks, then go back to mild and the sellers won't be AS intimidated with  the potential for price action like late last year, when we were -700 bcf behind the previous year early in Winter and had some extreme cold. 

Also, as you remember in 2018, a year ago we had cold that lingered well into the Spring with some record late drawdowns if I remember. You were on that one.

So the comparisons with upcoming storage  every week, from now...........thru April for instance will make it difficult for us create a big deficit again in the absence of sustained extreme cold.....and spike up near $5.

Another point is the difficulty that the models are having in capturing this fairly stout -AO pattern with consistency in week 2. 

As you noted, the Thursday Night models all warmed it up, thinking the PV would recede, then they cooled it back down on Friday Am because the PV was diving way farther south. 

Even the ensembles the last few days are doing poorly the last 2-3 days. The Canadian ensembles has been especially bad the last 10 days. 

The reason for this, I think is that previously, they all agreed on the northern stream being very dominant and PV very far south. Every day it was the same thing........just getting closer with each update.

Now, they "see" a competing flow from the Pacific which on some runs(operational especially) flips us to a completely new pattern/regime........then the next run.........oooops., never mind, there was a brand new perturbation in the northern stream flow that wasn't there 12 hours ago which energizes that stream and it takes over again.



I'll also add, to make it clear that huge HDD changes in week 1 can still count. If something like the outlier cold `12z European model from Friday were to verify, with the PV dropping down to the Ohio River, its would hard for milder changes after that to offset.

By WxFollower - Jan. 19, 2019, 7:03 p.m.
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 Thanks, Mike.  

 18Z GEFS much colder weeks 1-2 and coldest yet at a whopping 109 HDD above normal! This is probably the coldest day 1-14 GEFS in absolute terms this winter. GEFS has been biased cold in general in recent weeks, but it is still very cold even when taking that into account. Note that the -NAO/-AO blocking days 9+ is the strongest in a number of runs. Yes, there has been a bit of -AO bias on GEFS this winter but it is the strongest yet.

By WxFollower - Jan. 20, 2019, 4:17 p.m.
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Sun 12Z model update:


vs Sat 12Z:

GEFS +4

EPS: -5


vs Fri 12Z:

GEFS +1

EPS -7


vs Fri 0Z:

GEFS +25

EPS +4


vs Thu 0Z:

GEFS 0

EPS -9

 


By metmike - Jan. 20, 2019, 5:17 p.m.
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Thanks again Larry!

It should be interesting coming up. I have no position by the way.

Last Sunday Night it was a no brainer higher call because all the models were colder with no end in sight to the cold.

Now we have around the same cold as Friday afternoon, (much less cold from the operational Euro) to slightly less.

But interestingly, a potential pattern change that retrogrades the position of the ridge west/trough east pattern so that the east might warm up, starting later in week 2.................on some runs and models, especially 12z(but the Canadian had the opposite and was colder at 12z late in week 2)

We have a few solutions that just cut Pacific flow under a retreating Polar Vortex.

The PNA falling and NAO rising late in the period favors this. The strongly negative AO continuing may just mean the bitter cold enters the US farther west. 

But this is very uncertain. Model performance late in week 2 has dropped in recent days. Interestingly, the Canadian ensembles that were doing absolutely horrible a week to 10 days ago, has been improving gradually and its now in 2nd place for late week 2, just behind the GFS Ens.

Anyway, its not clear at all how we might open and trade tonight.

I would be looking to go short and join tjc if the latest trends of a pattern change to milder in the East continue but would be just as happy to take the other side if models go back to extreme cold aimed at the high population areas continuing and maybe happiest doing nothing.

I will say that the threat for a freeze in FL, as advertised by the European 12z Friday is minimal right now.

The interesting trade could be long coffee on increasing dryness in Brazil and the start of drought..........even though coffee fundamentals have been pretty bearish. 

By metmike - Jan. 20, 2019, 5:55 p.m.
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If the market wants to focus on these late week 2 changes, which is the biggest change since Friday pm,we will be lower on the open.


Sharply lower????

By WxFollower - Jan. 20, 2019, 6:11 p.m.
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 Indeed, the market opened sharply lower, apparently due to the late week changes showing on some models that you mentioned. 


Is this a good place to go short? I'd like some opinions. Or is it too risky due to the big drop from the Fri close?

By metmike - Jan. 20, 2019, 9:55 p.m.
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Larry,

We see how quickly that ng can fall, then bounce, then fall again from weather models changing back and forth.

Even with supplies almost caught up to last year.

The pattern really does look to turn milder and short really does look to be the next good trade but, like you said, the risk is basically from overnight models turning colder like they did Friday morning and we might spike back to 3.5.

We still have the upside gap below open, even though some of it was closed early Friday when the market thought the pattern was morphing milder..............then, SURPRIZE! all the 12z runs found a big new piece of northern stream energy(or at least diverted the path of it) that they didnt see before and used that to plunge the polar vortex much farther south. 

Thats the risk you take with a very negative AO also. Also, its not like we aren't going to have some major Arctic blasts before the warm up. So we are saying that the warm up is more than offsetting the frigid blasts that are now dialed in.  If, instead of the big warm up/pattern change at the end of week 2, we have slightly less cold..........that could still be bullish if the near term blasts resemble something like the 12z Euro from Friday.

 So the gap is from 3.166 to 3.201 ngg. Also, as long as that is open, ng is bullish technically to some folks.

However, the weather changing to milder is what can close the gap. We closed part of it on Friday morning when the overnight models were warmer.

We will have lighter than usual volume probably because of the holiday which might be a factor. 

We should probably check to see what the withdrawals for the next 10 weeks were last year to see what the market will be comparing with, although the 5 year average is important too.

If we are almost caught up to last years storage for instance, when last years price at this time was lower and storage is going to possibly gain more vs last year, it makes it harder to justify a price this high(other than, just recently it was MUCH, MUCH higher and the market hasn't settled back down yet)