For the weather that affects the natural gas market, go here:
Look how fast the mild weather in December and early January caused us to close the storage gap below. But now, the gap is widening/growing again because of extreme cold..............and we are still below the 5 year average and towards to bottom of the 5 year range.
Note: The shaded area indicates the range between the historical minimum and maximum values for the weekly series from 2014 through 2018. The dashed vertical lines indicate current and year-ago weekly periods.
EIA storage report last Thursday
-166 bcf This was considered a bit bearish(a slightly smaller drawdown than the average guess)
|Working gas in underground storage, Lower 48 states Summary text CSV JSN|
billion cubic feet (Bcf)
|Region||02/22/19||02/15/19||net change||implied flow||Bcf||% change||Bcf||% change|
These were the temperatures, ending the previous Friday, for that EIA report that came out last Thursday.
These were the temperatures for the 7 day period ending last Friday that will go into this Thursdays EIA number at 9:30am.
These natural gas price charts aren't the greatest (for April) but they do show a likely seasonal bottom.
Not just a higher low in Feb for the April contract but also a double bottom with the price it was at in January.
Huge support in that zone on the yearly chart.
Another interesting item is that on Friday, we appeared to be potentially breaking out of a down trendline going back to last December.............or, we could have just been violating it a bit, testing it and then going back down.
NG 7 days
Natural gas 3 months below
Natural gas 1 year chart
This seasonal price chart below is for 2 decades, ending back in 2009. Not sure on what they use exactly to make their calculations but I've been following seasonal patterns since the early 90's(I paid thousands of dollars in the 90's to get seasonal charts for every commodity updated every 2 years) and this graph does a nice job at capturing the seasonality of natural gas.
The point of showing it is to show that natural gas has a strong historical tendency to go up from mid February into April.
The lows in Feb., would be perfectly timed with a typical, end of Winter low, which is followed by increasing prices over 80% of the time into early Spring.
Considering how low the price is right now and the reversal up that day(new contract low-higher close), if the pattern morphs back to looking extremely cold later in March, it would increase odds for higher prices even more.
One should also note that at this time of year, when most of the heating season is over, weather/cold temperatures that increases heating demand in the high population centers has less power to determine prices.............as long as supplies aren't precariously low or the demand/supply fundamentals are not extremely tight. Fundamentals are actually pretty bearish........note the price is still fairly low even though storage is still less than the 5 year average.....because the market feels very comfortable...... is projecting additional storage gains from supplies gushing in.
Most recent discussion:
By wxgrant - March 1, 2019, 5:35 p.m.
My position continues to go against me. My plan is to see if a week or so with premium decay can bring me back to even or a slight winner. If not I'll just take the loss. I still have 0.22 or so of room. Thanks for all the information guys!
By metmike - March 1, 2019, 6:52 p.m.
Thanks again grant. I was tempted to short several times today but the market clearly was not going lower ahead of this cold next week.
I believe it would have gone lower if this were 2 months ago and at the prices we traded then, with the same forecast. It really is hard to get ng to go lower in March and April.
Some of this is sort of a self fulfilling prophesy thing involving Seasonals that long term traders use. People that have traded ng for 2 decades or just look at historical price charts, know that ng has gone up in something like 9 out of 10 years during this 2 month period.
Knowing this, they lean heavily towards the long side because the historical odds display such a profound tendency in that direction. Even in years that might not justify strength, it's the markets mentality that matters.
For instance, when we say that we are trading the weather in natural gas, the fact is that we are not trading actual weather because we are really trading the markets reaction to the weather forecasts. The perception or expectation of the future weather well before the actual weather happens.
For instance, if the market thinks that we are going to have record cold or weather colder than the previous day during a key time frame in January.....the price goes higher, mainly because a bunch of weather models convinced everybody that uses them of the same thing and they all acted accordingly because of the same expectations......and prices go up. Even if the models end up being wrong, on that day, everybody believed they were right.
On strong Seasonals, you will also have a lot of traders that believe prices are likely to go higher in March/April because they have done this in 9 out of 10 years. They are letting the historical price charts influence expectations.....for higher prices. Enough traders thinking that way creates a self fulfilling dynamic which actually causes prices to go higher and creates an additional positive feedback of another year when prices during these 2 months were stronger than one would have expected considering everything else.
The market, then remembers this as another year when prices went higher than what the other changing fundamentals at the time suggested.
No change in fundamentals or weather but prices go higher anyway.
Bearish changes and prices still end up going higher.
Bullish changes and prices go even higher than expected or have less selling resistance than expected.
By metmike - March 1, 2019, 7:10 p.m.
This is why I posted the ng seasonal price chart the past 2 weeks to show this powerful historical tendency for ng to go higher at this time of year.
However, weather, even though it counts less and less and is not always the most important trading factor every day by the time we get into mid-Feb onwards, as it was in January can still count when it's extreme.
If the 2nd half of March features the likely huge warm up and we have some early season injections, especially considering last year featured a bunch of record late heating season drawdowns, resulting in us quickly catching up to last year......it should be too powerful and too bearish for the market to ignore.
At some point it should cause a big surge in selling but one has to pick your spots to sell very carefully when Seasonals are strongly up. Timing is different than January.
If things remain unchanged, I will be looking to sell from the get go on Sunday night, assuming that the warm weather will be getting closer and closer and extending an extra day at the end of each updated extended forecast next week.
Those that sold this week, when the market was trading its bullish seasonal bias ahead of strong cold may have just been early.
Of course the weather can change and look much colder next week in the extended period.
By WxFollower - March 1, 2019, 8:44 p.m.
Interesting about the seasonals. To add, the deficit vs last year and vs 5 years ago is fcasted to widen sharply over the next 3 weeks. Also, the realistic possibility of storage getting close to 1000 is likely keeping sellers at bay for now.
By wxgrant - March 2, 2019, 12:44 p.m.
I would have waited to put on my position if I would have looked closer at the seasonal chart. With that said, I feel OK still on my position. The air mass moving into the midwest will be very cold, but it looks as though it will not be as cold as advertised 5 days ago. I have raised our low temperatures in my DMA.
By WxFollower - March 3, 2019, 4:11 p.m.
12Z Sun EPS vs 12Z/0Z Fri EPS for 3/4-15: HDD losses of 14/15
12Z Sun GEFS vs 12Z/0Z GEFS for 3/4-16: HDD losses of 12/18
By metmike - March 3, 2019, 4:45 p.m.
Hindsight(like mine on Friday) is always 20-20 and in some situations not that much different than this one, if you had waited, you would have missed it.
When we closed the gap higher earlier in the week from the milder looking extended maps, I didn't think we could make new highs for the week, while still keeping the milder look to the extended maps.........but we did.
I'm just glad to not have lost money being short because that was what the weather was telling me the next trade should be..............and sometimes, its impossible to time it...........very often being early but if you can hang on and are right, then you get paid.
If you are late however, you often jump in after everybody else knows and sometimes end up having to risk/lose even more if you end up wrong.
My guess is that we'll open lower and you'll be in great shape pretty quickly but some of the latest guidance is trying to make it a bit colder late in week 2. Just something to watch the next couple of days.
Maybe a big factor is just getting this current record cold wave out of the way.
By metmike - March 3, 2019, 4:46 p.m.
NG opened down but only slightly and has since been in a tight 1.5 cent range between 1.5 cents down and flat vs the Fri 1:30 PM CST settlement.
As expected, we did open a bit lower, then bounced immediately to test the early Friday afternoon highs near the day session close and settlement and failed immediately, trading back to the lows now but with a pretty tight range for natural gas.
2.844 to 2.859.
The 18z GFS ens is a bit warmer in the 1-10 day period but quite a bit cooler in the 11-15 day period.......continuing the trend mentioned earlier this afternoon in the Sunday weather thread with regards to late week 2 guidance starting to get cooler.
More ridging west, less ridging/more troughing east.
I was short (from 2.856) until seeing the cooler guidance and will just wait to see what the maps show overnight but think that if we morph back to milder, ng might be under some selling pressure tomorrow.............but don't want to be short here without the maps having lower than average HDD's for the 2nd half of March.
Right now, the GFS ens is a bit above average and the last Euro Ens has above average HDD at the end of 2 weeks.
At 50 minutes into the trading session, ng has bounced a bit again. Maybe the late period cooler maps on the GFS ensemble???
It's March and not January and one of the toughest things to do at this time of year for weather traders using weather in ng to trade successfully for the past several months, is to realize that the power of the weather to influence price is rapidly waning and on some days, the price could go in the opposite direction of what the changes on the weather maps would have caused earlier in the Winter with high confidence.
Monday morning Natural Gas Intelligence comment:
So the cooler shift in the models in week 2 noted yesterday has, at least affected the explanation from NGI for the strength earlier.
Monday closing comments from Natural Gas Intelligence:
As weather models continued to piece together an outlook on temperature trends into the second half of March, natural gas bulls and bears battled it out to a draw in the futures market Monday.
April NG closed at a 5 week high today. Two week 0Z model consensus/forecasts averaged ~+5 HDD vs yesterday morning's 0Z (EPS ~7 HDD colder while GEFS about unchanged). Today's 12Z vs 0Z GEFS/EPS averaged 2 HDD colder, pretty flat but enough to bring NG up almost to session highs. Also, it didn't hurt that the 12Z GFS was significantly colder than recent runs though the 12Z Euro was about 8 HDD warmer than its 0Z run.
I don't know whether or not NG will rise much over the next few days. However, if I had to bet on a rise vs fall between now and Fri, I'd as of now go with a higher chance that it will rise simply because of seasonals combined with ending storage threatening to get to near 1,000 bcf, if not a touch below that. The increased chance of cold returning to much of the US for much of the 2nd half of March keeps that possibility very realistic. What a comeback for winter!
Credit to Mike for posting over the weekend about a model trend toward colder at midmonth.
I am going to wait and see what happens with the Thursday report but I am feeling I may be rolling my position to May. I tried to sell a put to neutralize my position but never got the price I wanted. It is fun to watch, and a little nerve wracking!
Thanks Larry and Grant,
Here were the comments from Natural Gas Intelligence from this morning:
With small adjustments to the weather outlook overnight and a probable lack of upside for prices as near-term cold subsides, natural gas futures were trading slightly lower early Wednesday. The April Nymex futures contract was down 1.9 cents to $2.865/MMBtu shortly after 8:30 a.m.
NGI Thursday morning:
With overnight weather data coming in somewhat warmer and the market shifting its focus to the upcoming release of weekly natural gas inventory data, Nymex futures were trading slightly lower early Thursday. The April contract was trading 1.8 cents lower at $2.823/MMBtu just after 8:30 a.m. ET.
metmike: much milder overnight models can't keep ng down, at least not at the moment.
EIA report.............-149 bcf. The market hardly blinked but has been gradually weaker for the hour following the release because of milder extended models.....going from a bit higher to a bit lower now.
The Energy Information Administration (EIA) on Thursday reported a larger-than-average 149 Bcf withdrawal from U.S. natural gas stocks that came close
|Working gas in underground storage, Lower 48 states Summary text CSV JSN|
billion cubic feet (Bcf)
|Region||03/01/19||02/22/19||net change||implied flow||Bcf||% change||Bcf||% change|
Kicking myself for not selling a put while it was down to neutralize my position. I was a small winner for a time today but ended as a small loser. Still have 49 days left in the call.
The 12z GFS ensemble came out quite a bit colder after day 10 and gave ng some good strength after that.
EURO ensembles are cold through the end of march as well.
Natural Gas Intelligence Thursday closing comments:
With government storage data offering few surprises and midday weather data sending mixed signals, a natural gas futures market that has seemed.
The Canadian Ensembles are colder as well after day ten but not as much. You would think the cold air would run out.
From Natural Gas Intelligence:
As overnight forecasts continued to show colder-than-normal temperatures lingering deep into March and depleting stockpiles, natural gas futures were trading slightly higher early Friday. The April Nymex futures contract was up 1.4 cents to $2.880/MMBtu shortly after 8:30 a.m.
metmike: Interesting to note that yesterday, with similar cold the headline suggested that the market was not too concerned, this morning it's fueling concerns.
The -149 was solidly bullish vs the average guess of -140 per the WSJ. Also, for a week with 196 HDDs, it wasn't nearly as bearish as some other weeks have been this winter. However, some of that was due to freeze-offs as opposed to higher demand. The freeze-offs from this next report will be even higher. But afterward, they should be dropping sharply.