From Natural Gas Intelligence:
For the Tuesday weather that affects natural gas residential heating demand and natural gas prices:
February natural gas expires today. Watch out for wild price spikes!
Wow! Look how fast the mild weather last month and earlier this month caused us to close the storage gap below.
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.
These were comments from Natural Gas Intelligence after the EIA report last Thursday:
The Energy Information Administration (EIA) on Thursday reported a slightly larger-than-expected 163 Bcf withdrawal from U.S. natural gas stocks, prompting only a modest reaction from a futures market focused on the impact of upcoming polar vortex-influenced cold.
-163 bcf.......slightly bullish
We are now +33 bcf vs the previous year. First time to have a surplus compared to the prior year in a long time...............cutting a massive deficit in record time from the mild December and early January.
|Working gas in underground storage, Lower 48 states Summary textCSVJSN|
billion cubic feet (Bcf)
|Region||01/18/19||01/11/19||net change||implied flow||Bcf||% change||Bcf||% change|
These were the temperatures for the 7 day period used for that EIA storage report:
These are the temperatures, ending last Friday, used for this Thursday EIA report:
Previous natural gas posts:
By WxFollower - Jan. 24, 2019, 4:07 p.m.
Thanks, Mike. Though the market didn't react as if it were very bullish, today's EIA of -163 was solidly bullish vs the WSJ survey average of -145 and was fairly neutral vs longterm average draws for a 214 HDD week instead of being bearish due to looseness. I think that increases in freeze-offs likely had a lot to do with that. The freezeoffs for the next 2 weeks are likely to be even a good bit higher .
Had it stayed cold mid Dec-early Jan, the deficit still would have narrowed significantly but not nearly as much as it did/it got eliminated as you said).
But now we look ahead. Last winter's intense cold was about done for the winter by now and there were no more well below normal cold weeks until late March into much of April. So, that means that despite the looser balance, the upcoming extreme cold will cause a reestablishment of the deficit vs last year in next week's report and subsequent pretty rapid increase in said deficit to the point where we should easily fall back to ~250-300 behind last year over the next 2 EIA weeks. The subsequent EIA week may be near a wash because 2018 had one last big draw (194).
Then we wait and see what the 2nd week in Feb and beyond has in store. As Mike implied in the wx thread, a reestablishment of the +PNA has finally been reappearing in late week 2. Weak El Nino climo plus being in the colder (left side) MJO phases by then would support a +PNA/cold much of central and E US then. IF a solid +PNA really ends up being dominant from 2/8 into a good portion of March, we will have a legit shot at getting to 1,000 or below by 3/31. In 2018, the last 3 weeks of Feb added to only a draw of 259. If cold were to dominate then, we could easily have draws adding to 450 or so, meaning a further increase in the deficit of 200 vs last year, which would then put the deficit back up to near 450-500 heading into March. That would put storage near 1,200 heading into March. IF that happens and IF there is a chilly March (favored by weak El Nino analogs), there could be draws adding to 250-300 for the full month of March. So, I'm saying the 3/31 storage could end up as low as about 900 or within only 100 of the 2014 low in the 800s and only the 2nd time since 2004 with storage under 1,000. That's why wx has and will continue to be for the forseeable future such a key variable in the daily fluctuations of the price of NG.
**Edit: New Euro weeklies are dominated by a cold E US and are supportive of NG. That probably had something to do with the couple of cent gap up this evening though the 18Z GFS was cold, too, fwiw.
By tjc - Jan. 24, 2019, 9:16 p.m.
Larry and MetMike
Thank you for the weather and usage updates.
I pretty much suspect that ng and ung rally significantly tomorrow as my attempt to buy additional calls missed by two ticks!
By metmike - Jan. 24, 2019, 9:20 p.m.
From Natural Gas Intelligence:
With extreme polar vortex cold set to arrive next week and guidance advertising cooler trends into early February, natural gas futures rebounded
By tjc - Jan. 25, 2019, 12:10 p.m.
Significant rally after 930 am open dip. Soooo....I had a chance to 'add'.
Notwithstanding, calls now profitable---which leads to the next decision---
shall I take profit or exercise! 4pm decision required
By WxFollower - Jan. 25, 2019, 3:23 p.m.
1. I don't think you're asking Mike or me but in case you are, I don't make trading recommendations to others. It is a difficult enough challenge to make money in one's own account.
2. The models are mixed at 12Z vs 0Z. Whereas the GEFS is slightly warmer, the EPS is quite a bit colder (mainly in the 6-10 day period), which is a reversal of the warmer 0Z EPS. So, it is close to the EPS of 24 hours ago. Also, the CDN ens is slightly colder.
So, 12Z models were mixed.
3. There is a good chance for record cold in the Midwest and the coldest in many years mid to late next week. In theory that should have already been largely dialed in, but I wonder about this market sometimes. Any dialing in isn't that noticeable being that NG is some 30 cents lower than it was at the settlement a week ago. Today is up on cold for sure but the extreme cold of mid to late next week first showed up many days ago. It appears to me that there are bearish forces willingly/aggressively selling into rises for whatever reason. You can see as they unleash their bearish based algorithms. That selling isn't due to wx because NG would be much higher than it is now if wx were the main factor.
4. Good luck with your decision!
By tjc - Jan. 25, 2019, 4:08 p.m.
I am much indebted to both of you for your 'interest' in my trade.
I closed it out for a slight profit approximately 330pm.
I always appreciate your posts, and as you correctly state, I do not depend upon your posts to make a decision.
Larry, after the fact, your post completely describes my closing out prior to reading your post. Weather should have had this trade much higher (for sure last week any weather moved the trade vigorously) and when it could not make a new high early this afternoon, I decided to trade through it rather than exercise.
It has been an exciting three trades---the calls, sold ONE day too soon at a profit, then the puts sold ONE day too soon at a better profit, and finally etf calls basically scratched.
It appears the common denominator is "too soon".
By metmike - Jan. 25, 2019, 7:53 p.m.
Sorry for not commenting earlier.
I coach scholastic chess T-W-Th-F at 5 different schools from 2-5pm Central until April.
Congrats on this and your other profits TJC(including beans). Good week trading for you.
I would have suggested taking a profit unless you want to take a huge chance of the market opening strongly against you. There is just as much chance of that as with going in your favor in this environment.
Also with regards to closing your other positions 1 day too soon, I would not compare your profit to where it would have been if you had just waited one more day..........then on that day, knew somehow to get out right then vs staying and waiting a couple more days and lost money............especially if you are trading options, which are not the best way to efficiently day trade natural gas for profits.
This sort of thinking not only beats a person up because hindsight is always 20-20 but in a sensitive weather market going back and forth, unless you have timely access to all the models, you will be at a great disadvantage to other traders that do on the timing of trades.
The market is zig zagging with the latest weather forecasts. You made some good calls and got lucky that the weather forecast cooperated and changed in your favor, when trading both sides for a profit. If the weather forecast had stayed consistent and been in one direction, only one of your positions would have made money and the other one would not have.
In other words, it wasn't support/resistance or technicals that caused the market moves.....it was changes in the weather forecast.
I know that you've stated that the market reacts before the weather forecast but what we are seeing in a pure weather market is often those with the best weather information are in there causing an initial, early reaction before most of the market gets the weather and it appeared as if the market reacted before the forecast.
As Larry has stated often too, there is some algo trading that causes crazy gyrations and huge over reactions, where big traders pile on in one direction.
Regardless, it's great to see you make money based on well thought out trading strategies and share your trades with us real time.
By metmike - Jan. 25, 2019, 8 p.m.
The milder 18z operational GFS and ensembles would have me a bit nervous IF I was long(and probably considering getting short if we were trading) but the maps will look completely different on Sunday.
So, at the moment it looks smart to have covered your long for a small profit!
By WxFollower - Jan. 26, 2019, 6:42 p.m.
12Z Sat vs 12Z Fri in HDDs:
GEFS: no change 1/27-2/9
EPS: -30 for 1/27-2/7!
12Z Fri vs 0Z Fri
0Z Fri vs 12Z Thu
So, this gives us the following for 12Z Sat vs 12Z Thu:
So, this is consistent with a significant warming trend the last 48 hours for the 2 week forecasting period. If NG had been re-opening this evening, I'm confident it would have been down a good bit (at least eerasing much of Fri's gains).
However, the record breaking extreme cold for the Midwest mid to late next week remains likely. In theory, this should have already been dialed in by the NG market since it has been on the models for many days now. But you'd hardly know it from this week's 30 cent drop, which even incorporated a solidly bullish weekly EIA. That market sure can be baffling sometimes until I realize that there are nonwx factors in play, too. Some of these non-wx factors apparently are pretty bearish. I'm assuming increased production is one of them though it has actually decreased in the short term due to freeze-offs. So, I really don't know. Perhaps longer term increased production is being assumed?
By metmike - Jan. 26, 2019, 10:03 p.m.
We can probably agree that natural gas would be trading lower here if it was basing the trading on changes in HDD's since the close.
The extraordinary nature of the cold coming up is so intense, that it makes one wonder how much lower we can go ahead of it, even if its been there for over a week.
My guess is that its mostly dialed in and since its really only around 5 days worth of very big HDD's, followed by a pretty quick warm up, where week 2 temps are NOW around normal(vs previous forecasts that were below normal). the market can look beyond that.
The 8-14 day today is computer guidance and very uncertain but the southern half of the country has above normal temperatures today, with a small area of blue in the Northcentral US.
This is a massive shift from just yesterday, which also featured widespread BELOW in the eastern half of the country for weeks 3-4 and the European weekly and monthly showing a great deal of cold coming from the Thursday forecast.
If the market is fed all this NEW warmer/bearish weather against the "possibly" dialed in 5 day period of brutally cold temps my opinion is that it will go lower, probably MUCH lower.
Wait a sec, I just realized that NGG expires on Tuesday. There is a chance for a big, brief spike higher just ahead of expiration of the front month, to coincide with very strong cash prices related to this weeks frigid weather.
We also had the rock bottom/bullish -AO on Friday, at the end of week 2 that today, recovers fast during week 2 to almost 0.
Of course the AO and the solutions on the models will go hand in hand. With the milder changes since yesterday on the weather features, of course the AO is not going to be as negative.
I agree that it can change on a dime, especially in this case because we have several key battles going on:
1. How much northern stream vs southern stream? The northern stream has been incredibly dominant and featured the polar vortex plunging unusually far south. (SSW event a month ago) . Models do especially poorly in locking in on northern stream dynamics but are better able to see southern stream dynamics based on whats going on in the Pacific(Madden Julian Oscillation and it downstream impact for instance), if a tropical connection is made with the southern stream, seems to increase forecast skill tremendously.
2. The location of the long lived ridge west/trough east couplet. If it retrogrades for instance, then we can turn a bullish pattern into a bearish one by changing the entry point of the coldest air to farther west and if the trough is far enough west, intervals with very mild air will increase ahead of any cold waves (that have the opportunity to moderate a great deal as they track away from their bitter cold source region)
3. Pattern change potential. This is related to #2 as the pattern change chances seem to be increasing and the change, may only be a shift westward of the large scale, features.
On a planetary scale, maybe its not huge to shift everything 500 miles farther west vs a complete metamorphose to something that reconfigures and looks entirely different.
However, in this case, it looks like several things happening at one.
a. The potential for the shift westward
b. The polar vortex retreating back north
c. The southern stream becoming much more dominant, especially in the Southeast and maybe East Coast but again, the retrograding nature of the pattern and the invigoration of the southern stream may be working in tandem with each other..........which could also be a factor in sending the polar vortex back home to Mommy Arctic.
By WxFollower - Jan. 27, 2019, 8:19 a.m.
Wow, the model consensus for weeks 1 and 2, combined, looks quite a bit warmer than the already significantly warmer models of 12Z yesterday. Expect a big gap down this evening absent a last minute reversal in the models this afternoon.
By WxFollower - Jan. 27, 2019, 3:47 p.m.
I said earlier: "Wow, the model consensus for weeks 1 and 2, combined, looks quite a bit warmer than the already significantly warmer models of 12Z yesterday. Expect a big gap down this evening absent a last minute reversal in the models this afternoon."
Update: There was no reversal. Actually, there was a further warming at 12Z.
12Z Sun vs 12Z Fri: GEFS lost 32 HDD 1/28-2/9
12Z Sun vs 12Z Fri: EPS lost 47 HDD 1/28-2/7
These were some of the largest changes you'd typically see for ensemble runs over just a 48 hour period. GFS operational runs could easily have changes like this in just 12 hours, especially due to the very unreliable/volatile 11-15 day period. But, the changes I'm noting here are from ensemble runs, which are much less volatile.
Keep in mind that these changes are based on apples to apples. I'm looking at the days noted in these comparisons. I'm not looking at new days added onto the end as that wouldn't be apples to apples.
By tjc - Jan. 27, 2019, 5 p.m.
My Jan. 13 post appears will come to fruition IF the warm forecast results in a down Monday.
I do not know how to re-incorporate the Jan 13 post.
I bought calls correctly, did not wait until Tuesday to reverse and then (correctly)re-reversed, but did not re-re-verse Friday at close (but did close out the call)
BOTTOM line---caught counter trend move, correctly (one day too soon) reversed, but never held short to this Monday expiration.
By WxFollower - Jan. 27, 2019, 8:11 p.m.
Not surprisingly, Mar NG opened down over 18 cents. It then fell to as much as 23 cents down. Since then, it has settled down and is trading now down 20 cents. What next? Stay tued for the next episode of "As The Wx Turns".
Congrats to tjc for what turned out to be an excellent decision, one that Mike endorsed.
By metmike - Jan. 27, 2019, 8:49 p.m.
We are happy for you tjc.
By tjc - Jan. 27, 2019, 9:25 p.m.
Kind words, Mike.
Sometimes fear is good!
Strange--coldest, most severe winter weather in years this week in Midwest and East, yet NG probably putting in a daily cycle low. March probably a buy 275.
Drawdown on Tuesday may spur short covering rally---Larry would know this best.
By metmike - Jan. 27, 2019, 10:09 p.m.
The cold coming in was dialed in a long time ago. In fact, the market first saw this on January 13th, when we gapped higher on Sunday Night. No doubt you remember that one. We were both long from the previous week.
We spiked higher the next 2 days but the cold, at that time was about the coldest the models have been between now and then.
We've gone back and forth on the intensity but this current invasion of the polar vortex has always been there.
On Friday, it looked like possibly more cold after this. If that was the forecast now and it was intense cold, we could be higher.
So the market is mainly trading the NEW news tonight. Which is a big warm up after this long traded record cold wave ends later this week.
Since Feb expires on Tuesday and cash prices are likely to spike higher this week and we will have some freeze offs this week, it would not surprise me to see some brief, spikes higher.
If the models turn cold again(the northern stream is still potentially very strong but is being displaced on the models by a strengthening southern stream that will carve out a big upper level ridge in the Southeast, which will pump warm/moist air northward in the the Southeastern 1/3rd? of the country.
This will cause the coldest air masses to be aimed farther northwest and to moderate more behind cold fronts tracking southeast, which will meet the resistance of the upper level ridge/southerly steering currents. in the southeast and vicinity.
Closing comments from Natural Gas Intelligence
The February Nymex natural gas futures contract ended on a positive note Tuesday, recovering from early losses as long-range forecasts hinted at more cold arriving after a milder break next week. In the spot market, Midwest prices surged for a second straight day as forecasters were looking for the most extreme temperatures from this week’s polar cold front to hit the region Wednesday; the NGI Spot Gas National Avg.added 77.5 cents to $4.400/MMBtu.
Closing comment from Natural Gas Intelligence Wednesday:
For a market dominated by weather, the polar blast sweeping across the eastern half of the country arrived too little too late for natural gas traders eyeing the extended mild break on tap beginning this weekend. The Nymex March gas contract, on its first day in the prompt-month position, slipped 4.9 cents to $2.854, even as temperatures in Chicago plunged more than 20 degrees below zero earlier in the day. The April gas contract was down 3.9 cents to $2.808
EIA report from Thursday January 31, 2019
-173 bcf bearish
|Working gas in underground storage, Lower 48 states Summary textCSVJSN|
billion cubic feet (Bcf)
|Region||01/25/19||01/18/19||net change||implied flow||Bcf||% change||Bcf||% change|
Totals may not equal sum of components because of independent rounding.
Working gas in storage was 2,197 Bcf as of Friday, January 25, 2019, according to EIA estimates. This represents a net decrease of 173 Bcf from the previous week. Stocks were 14 Bcf less than last year at this time and 328 Bcf below the five-year average of 2,525 Bcf. At 2,197 Bcf, total working gas is within the five-year historical range.
For information on sampling error in this report, see Estimated Measures of Sampling Variability table below.
From Natural Gas Intelligence:
The Energy Information Administration reported a 173 Bcf withdrawal in its weekly natural gas storage report Thursday, a bearish surprise that prompted a modest sell-off in the futures market.
The 173 Bcf pull from U.S. gas stocks for the week ended Jan. 25 compares to a 126 Bcf draw recorded in the year-ago period and a five-year average draw of 150 Bcf. While larger than average, the actual figure comes in well below most estimates.
As the figure crossed trading screens at 10:30 a.m. ET, the March Nymex futures contract took an immediate hit, though not an especially pronounced one. After trading around $2.850-2.870 in the hour leading up to the report, the front month quickly sold off to as low as $2.811 before climbing back up to around $2.830-2.840 over the next few minutes.
By 11 a.m. ET, March was trading around $2.835, down a few pennies from the pre-report trade and down about 2.0 cents from Wednesday’s settle.
Prior to Thursday’s report, estimates had pointed to a withdrawal in the mid to high 180s Bcf range. As of Wednesday a Bloomberg survey had produced a median of 197 Bcf, while a Reuters survey pointed to a 189 Bcf pull. Intercontinental Exchange futures settled Wednesday at a 184 Bcf withdrawal.
Based on discussions over energy chat service Enelyst immediately following the report, the withdrawal in the East region came in lighter than market participants had expected. Meanwhile, some market watchers expressed skepticism over the number, with Genscape Inc. analyst Eric Fell suggesting it might be a true-up following a larger-than-expected pull reported last week.
Other potential factors Enelyst participants used to explain the low draw included higher wind and coal power burns during the week, as well as potential demand impacts from the Martin Luther King Jr. holiday.
Total working gas in underground storage stood at 2,197 Bcf as of Jan. 25, 14 Bcf (0.6%) below year-ago stocks and 328 Bcf (13.0%) below the five-year average, according to EIA.
Closing comments from Natural Gas Intelligence:
A bearish government storage report, combined with forecasts showing too little cold too late in the season, pressured natural gas futures lower Thursday
This was the 1 day temperature map from Tuesday. The coldest anomalies, in the violet are so extreme that that there should be numerous additional colors/shades to properly display the values.
For instance, the coldest shade on the top map represents temps less than 20 degrees. It looks like we could use 7 additional colors/shades, going north to an isotherm of less than -15 deg. F.
This was Wednesday................36 degree below average anomaly on the 2nd map!!!
This was Thursday: