From Natural Gas Intelligence:    

Forecasts Mostly Unchanged as September Natural Gas Holds Steady Overnight

     8:51 AM    

September natural gas futures were set to open Friday close to even at around $2.965/MMBtu, with overnight forecasts maintaining similar themes as the market continues to shrug at stockpiles sitting at their lowest level in years.

From metmike: They overlooked the cooler air intrusion in the Upper Midwest/Northeast next week, which may be why we're lower.

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!

EIA number from Thursday  +48 bcf        Neutral.  

Below are the temperatures for the period that the EIA just reported on. The next 7 day period ends today for next weeks report. I'll have that when its available.

At the bottom are the first 5 days of that  period:

First 5 days for next weeks EIA report:

Natural gas has hit some tough resistance(with an expected increase in supplies coming soon.....offset with coming heat). Storage data yesterday was neutral. 

It would be a  MAJOR upside breakout to close above $3. If we can't do it, then it could be a top. Low storage and late August heat are the bullish factors.

Natural gas 3 months

Naturalgas 1 year below

Naturalgas 5 years below

Naturalgas10years below

Seasonals based on historical prices.

Previous comments:

By Jim_M - Aug. 16, 2018, 10:35 a.m.            

Buying opportunity.  it's 100bcf below what it will take to catch up to last year and get up to the 5 year average.  

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                By WxFollower - Aug. 16, 2018, 11:52 a.m.            

 I agree with Mike. It was already down before the report due imo to a cooler mainly Euro ensemble. The GFS suites have been more volatile...so I consider them more neutral. Perhaps the 12Z runs will provide shed more light on which of the two suites has a better clue?

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                By Jim_M - Aug. 16, 2018, 12:04 p.m.            

Sounds like the cattle mantra.  "There is all this supply coming online", but yet, the price keeps going up and cattle supply is slightly around historical averages.  

Historically, NG is strong this time of year.  Injections are not impressive at all.  A couple of bcf above predictions is bullish verses projections.  That we lost ground to last year is not.  We are WAY behind in all categories of storage.  Day to day there might be some downside due to weather, but to my way of thinking we are in a precarious position.

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                By patrick - Aug. 16, 2018, 12:38 p.m.            

I don't see the storage numbers as that bad. The last 5 years at 3600-4000 max are way above the longer term average, and it would take a very abnormal winter to draw down from anything over 3000 to a problem zone.

Still, for the last 5 years Cheap Gas has led to a huge increase in consumption, so when production finally starts slowing....

Whenever that is.

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                By metmike

It will turn precarious if we start Winter low and then get some record cold early on. 

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                By Jim_M - Aug. 16, 2018, 1:28 p.m.            

At an absolute best, we are going to struggle to get much over 3000 BCF.  With so much electric being generated by gas and we are exporting more than ever, we are not in a good position.  

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                By WxFollower - Aug. 16, 2018, 5:09 p.m.            

1. When considering CDDs in relation to the prior 4 weeks, today's EIA of +33 was clearly bearish though perhaps it was a bearish blip. We'll see in upcoming weeks. Also, vs. the DJ News industry survey mean (+29), it was the first bearish EIA in 2 months (last was for the week ending 6/15) as the prior 7 weeks were either bullish or neutral. In addition, the weather forecasts today looked a bit cooler than they had looked in relation to normals for the rest of the month. That combo made it quite hard to have an up day today. As it was, it closed nearly two cents off the lows. If it were to look warmer in the days to come or at least not any cooler, today's low of 2.891 would have a decent chance to hold considering the tight storage situation.

2. Compared to the last 2 years, I also have the +33 bearish based on the very hot 93 CDD week, the 2nd hottest of this summer to date. However, rather than bearish I have the +33 pretty neutral vs the last 15 years overall when considering the # of CDDs:

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

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

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

3. Now regarding 1998-2002, I have the +33 bullish vs all 5 of those years when considering the 93 CDDs.

(I don't have 1997-1994 CDD data to compare to. So, I can't analyze those 4 years.)

4. The 8/10/18 storage of 2,387 is the lowest for August 10 since way back in 2003! These years had lower storage on August 10 going back to 1994: 2003, 01, 00, 97, 96, and 95. 1999 was about the same.

 Anyone have a different take on the current storage situation?

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                By metmike - Aug. 17, 2018, 12:21 a.m.            

Thanks tremendously for the magnificent insight/stats Larry.

My ng storage records are at home(I'm in Detroit for 2 weeks taking care of my dad) but we can just go to the online EIA historical data to see......or we can rely on your stupendous statistics. 

I'm guessing from memory that todays prices below $3 are lower than many years before the age of fracking/horizonal drilling when storage for this date was higher. 

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                By Jim_M - Aug. 17, 2018, 8:10 a.m.            

Lower.....for now.  (G)

                By Jim_M - Aug. 17, 2018, 4:57 p.m.            

It seems the extended forecasts have slowly shifted this week from cool and wet to warm and dry again.  

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   By metmike - Aug. 17, 2018, 10:30 p.m.          

Agree exactly  with your take on todays's price movement Larry!

Jim,

I've been saying for the past few days that the cool NWS extended outlooks from early/mid week could bust/be much warmer:

                Re: Weather Tuesday            

                     By metmike - Aug. 14, 2018, 3:20 p.m.            

          (NWS)  Extended looks cool in the middle, very warm along the coasts......there is a good chance with so much uncertainty in week 2 and some solutions the complete opposite of this, that the forecasts below will bust.

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  Re: Weather Wednesday           

                By metmike - Aug. 15, 2018, 3:45 p.m.          

        Extended from NWS still shows cool and wet/average for the Midwest. Warm along the Coasts.

Could turn out much different with regards to temperatures as we get deeper into week 2(potential to be much warmer in the midsection)

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                Re: Re: Weather Thursday            

                           By metmike - Aug. 16, 2018, 3:43 p.m.            

NWS extended maps turning in the directions as speculated yesterday:

"Could turn out much different with regards to temperatures as we get deeper into week 2(potential to be much warmer in the midsection)"

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   By MarkB - Aug. 19, 2018, 1:05 a.m.            

            So. Fundamentally, we should be bullish. Trade the charts.

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Newer 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.            

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

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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Comments in the last day:

     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. 

  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

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!

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

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

  Oh for the gap and drop Monday!

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

  What is your weather forecast?

  One more day?

  Can Sept breach 285?

https://www.marketforum.com/forum/topic/11355/