Natural Gas Wednesday
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Started by metmike - Aug. 29, 2018, 10:47 a.m.

September Natural gas expires today!


For weather that effects the natural gas market(Cooling Degree Days in the Summer help gauge residential natural gas use because natural gas is used to generate electricity for air conditioning:


https://www.marketforum.com/forum/topic/11564/

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By metmike - Aug. 29, 2018, 11:02 a.m.
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From Natural Gas Intelligence:



End of Summer in Sight as September Natural Gas Called Higher Ahead of Expiry

     8:59 AM    

The expiring September natural gas futures contract was set to open Wednesday about 2.0 cents higher at around $2.872/MMBtu as forecasts overnight continued to show cooling demand tapering off by the end of next week. The October contract was trading about 1.7 cents higher at around $2.862.


metmike: Weather models overnight are warmer but expiring Sept will take front stage today

By metmike - Aug. 29, 2018, 11:06 a.m.
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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!

Working Gas in Underground Storage Compared with Five-Year Range

By metmike - Aug. 29, 2018, 11:06 a.m.
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EIA number from lastThursday  +48 bcf        Neutral.  

                                                                                                                                                                                                          

Working gas in underground storage, Lower 48 states Summary textCSVJSN
  Historical Comparisons
Stocks
billion cubic feet (Bcf)
 Year ago
(08/17/17)
5-year average
(2013-17) 
Region08/17/1808/10/18net changeimplied flow  Bcf% change Bcf% change
East613  592  21  21   724  -15.3  716  -14.4  
Midwest632  603  29  29   818  -22.7  786  -19.6  
Mountain153  151  2  2   206  -25.7  186  -17.7  
Pacific239  240  -1  -1   295  -19.0  321  -25.5  
South Central798  801  -3  -3   1,076  -25.8  1,025  -22.1  
   Salt185  190  -5  -5   275  -32.7  266  -30.5  
   Nonsalt613  610  3  3   801  -23.5  759  -19.2  
Total2,435  2,387  48  48   3,119  -21.9  3,034  -19.7  

By metmike - Aug. 29, 2018, 11:07 a.m.
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Below are the temperatures for the period that the EIA just reported on in the latest report last Thursday. 

At the bottom are the  7 days for the next report:


http://www.cpc.ncep.noaa.gov/products/tanal/7day/mean/20180817.7day.mean.F.gif

Temperatures for the next report below.............cooler, so injection should be larger!

http://www.cpc.ncep.noaa.gov/products/tanal/7day/mean/20180824.7day.mean.F.gif

By metmike - Aug. 29, 2018, 11:07 a.m.
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Natural gas hit some tough resistance last week. Even the hottest of the hot forecasts couldn't push us to $3 with very low storage.

Natural gas 3 months
         


Naturalgas 1 year below

Naturalgas 5 years below

                   

Naturalgas10years below                
                   
By metmike - Aug. 29, 2018, 11:08 a.m.
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Seasonals based on historical prices.

Erdgas Future saisonal

By metmike - Aug. 29, 2018, 11:10 a.m.
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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.            

           

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

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

                 +++++++++++++++++++++++++++++++++++++++++++++++++

                                            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_200_wnd_ht_s.gif   
      gfs_namer_120_500_vort_ht
      gfs_namer_120_500_vort_ht_s.gif   
      gfs_namer_120_1000_500_thick
      gfs_namer_120_1000_500_thick_s.gif   
      gfs_namer_120_850_temp_ht
      gfs_namer_120_850_temp_ht_s.gif


  

            

      gfs_namer_360_200_wnd_ht
      gfs_namer_360_200_wnd_ht_s.gif   
      gfs_namer_360_500_vort_ht
      gfs_namer_360_500_vort_ht_s.gif   
      gfs_namer_360_1000_500_thick
      gfs_namer_360_1000_500_thick_s.gif   
      gfs_namer_360_850_temp_ht
      gfs_namer_360_850_temp_ht_s.gif

                                    


           ++++++++++++++++++++++++++++++++++ 

       

                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!

                                    


            

                

By metmike - Aug. 29, 2018, 10 p.m.
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