Previous discussions on natural gas here:

https://www.marketforum.com/forum/topic/23680/

Larry,

Are you in the mood to provide an assessment for the natural gas opening? You have a great knack for calling it.

If the weather matters, then lower/sharply lower......with high confidence.

How many fewer HDD's do we have now compared to last week?  You always keep close track of that stat. I just look at the last 24 hours of HDD changes in the models  and mainly the maps/pattern.

We opened a little bit lower but came back to unchanged.

 It has nothing to do with mood right now but rather just having been very busy this weekend and even now. But also, with a position on before the open, I normally don't like to say too much since I might not be objective. I'll try to post later.

OK, thanks much in advance Larry!

I shorted some on the open but got out around break even and will wait for overnight guidance.

The market is holding nicely so far and if models are colder overnight, I would rather be long than short.

Friday's price action featured a reversal up from a contract low and at a time of year that frequently features THE bottom, especially on a strong downward move.

We also saw a slightly higher close for the week after those contract lows.

Of course the weather models looked MUCH colder then(at least to me). 

From late Feb into April, seasonals are the most bullish of the year for natural gas...........so if we have a  STRONG ridge west/trough east pattern coming up that features the coldest weather shifting into the high population centers of the Midwest to Northeast, being long might pay off. 

A modest ridge west/trough east to zonal flow pattern will not tap into air from far enough north to create the cold anomalies we want to see.

However, when there is ample storage at this time of year, the market can sometimes ignore the weather changes that it would have reacted to a month ago.

Wow! Look how fast the mild weather in December and early January 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.

                                                                            Natural gas drawdown last Thursday -78bcf                                     

Summary

Working gas in storage was 1,882 Bcf as of Friday, February 8, 2019, according to EIA estimates. This represents  a net decrease of 78 Bcf from the previous week. Stocks were 30 Bcf less than last year at this time and 333 Bcf below the five-year average of 2,215 Bcf. At 1,882 Bcf, total working gas is  within the five-year historical range.

These were the very mild 7 day temperatures(mean) for the  EIA report, last Thursday at 9:30am.

These are/were the 7 day temperatures, ending last Friday that will go into the next storage report, released this Thursday at 9:30am:

These natural gas price charts aren't the greatest but they do show a potential double bottom with the low last Friday/week, actually getting a tad lower than the week before, then closing higher on Friday and a tad higher for the week..............with weather models looking much colder to me on Friday.

NG 7 days

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. 

Last weeks contract low/double bottom 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 last Friday's reversal up(new contract low-higher close), if the pattern morphs back to looking extremely cold later this month and 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 life of contract lows for price 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.

0z operational GFS was much colder than the last run and 3 runs ago but around as cold/slightly less than the one from 2 runs ago.

GFS Ensembles also colder later in week 2.

 Mike, sorry about the delay in posting. Since I covered earlier (gain) and am currently flat, I now feel I can talk objectively more easily. I fully understand why NG rose quite a bit tonight. It was all due to a colder late week 2 in the models with first the 0Z GFS colder in all of week 2 and then, more importantly  the GEFS being colder in late week 2. Subsequently, the CDN ens and Euro ens were colder late week 2. These colder changes were enough to make the entire two week GEFS/EPS models colder than the prior late Sun runs. But here's where it may get tricky: as cold as late week 2 looks, I have both the 0Z GEFS and 0Z EPS as actually still being warmer for the same days that were forecasted on the Fri 12Z models thanks to a much warmer 2/20-24. I have the 0Z Mon EPS a whopping 14 HDD warmer for just 2/20-4 vs Fri's 12Z EPS and the 0Z Mon GEFS ~16 warmer than Fri's 12Z GEFS! In contrast, I have 2/25-3/1 6 colder on the 0Z Mon GEFS vs Fri 12Z GEFS and 8 colder on the Mon 0Z EPS vs Fri 12Z EPS. Therefore, for the key overall 10 day period of 2/20-3/1, I  have the 0Z Mon GEFS still 10 warmer than the 12Z Fri GEFS and I have the 0Z Mon EPS still 6 warmer than the Fri 12Z EPS. 

 So, although NG is maintaining a good portion of tonight's rise from the session lows, it has pulled back a fair bit. I'm wondering if that's due partially to what I just stated causing folks to go ahead and take their profits.

 What will she do from here? I don't normally predict price movements here but instead prefer to lay out possibilities:

 Is the colder late week 2 enough to maintain the current gains or even increase them considering how cheap NG is, how low storage is in relation to especially the 5 year average, and considering seasonals that often are near lows now? Or is this much warmer 2/20-4 going to be enough to keep it from rising back much more and possibly going to cause it to fall back some pending the 6Z/12Z runs not being colder than 0Z due to supposedly higher levels of production?

12z Mon GEFS vs 0Z Mon GEFS: I have it ~5 warmer though this is mainly in the 1-5. The 11-15 is still quite cold. But again, here's the tricky part: 2/20-24 is now a whopping 19 warmer on the 12Z Mon GEFS vs the 12Z Fri GEFS. Now, what about the period 2/25-3/1? It remained stable and is ~1 colder on the Mon 12Z GEFS vs Mon 0Z GEFS. So, that means 2/25-3/1 is ~7 colder on the 12Z Mon GEFS vs the 12 Fri GEFS. So, the total 2/20-3/1 period nets out 12 warmer on the 12Z GEFS vs the 12Z Fri GEFS.

 By the way, this means that the Mon 12Z GEFS is about the same as the 0Z Fri GEFS since the 12Z Fri GEFS was ~~13 or so colder than the 0Z Fri GEFS.

**CORRECTED for typo. This was fixed to say:

"Now, what about the period 2/25-3/1? It remained stable and is ~1 colder on the Mon 12Z GEFS vs Mon 0Z GEFS."

Thanks immensely Larry!

Natural gas surged overnight, initially from the GFS products coming out much colder, then the EURO Ensembles for a key period, starting around 9 days from now. 

Then we came all the way back down and tested the lows from yesterday evening just before, then just after the 6z operational model came out.

The week 2 forecasts, especially the ensembles(Euro 0z and Canadian 12z) are looking colder and colder.

A couple of days ago, I was thinking the new pattern might feature a zonal jet stream coming from the Pacific that blew out the cold west of the Rockies and kept the cold farther east from penetrating too deeply, with the polar vortex retreating a bit farther north.

Latest guidance downplays the milder jet and enhances the colder one and allows the cold to penetrate deeply enough into the northern states to crank up some high HDD numbers.

Am not leaning either way to trade right now. We closed early today because of the holiday.

 You're welcome, Mike. This is very tricky. The combo of seasonals, low price, and quite cold/colder vs Fri week 2 favors higher prices but a much warmer week 1 vs Fri that more than negates the colder of week 2 in terms of # of HDD combined with supposedly higher production favors slightly lower. I think that's why it was essentially a stalemate (chess term for you <G>) at the halt today. If week 1 ever stabilizes/stops warming and week 2 continues to cool more, I'd think a decent rise would likely occur then.

 As you noted, NG actually fell back quite a bit from last nights highs prior to the 6Z GFS. I said that might happen because of the realization of the much warmer 2/20-4.

 I'm currently in my favorite position for talking and my favorite and most common position overall: flat.

Closing comments from Natural Gas Intelligence on Tuesday:

Wintry Blasts Fuel Natural Gas Futures, Cash

     5:30 PM    

Despite weather trending milder for the next week, natural gas futures prices strengthened Tuesday as the back end of forecasts showed cold weather returning and possibly lingering through the first third of March. The Nymex March gas futures contract settled 3.7 cents higher at $2.662. April climbed 4.1 cents to $2.697.

NGI morning comment:

Colder Trending Overnight Forecasts Lift March Natural Gas to Modest Early Gains

 I'd say that wx was hardly the dominant factor that affected NG today. Bitter cold on the model consensus and it hardly went up on it all day and algos actually brought it down instead. So, it is obviously trading more on something else that is bearish, which I'm guessing is higher production though who knows if the market is "right" on this?

Wx isn't always dominant. Today was clearly one of those days. Otherwise it wouldn't be down for the day. I'm confident that wx caused some fluctuations but the background was obviously bearish amongst the small wx related moves.

 **Edit: Further to the above/evidence:

 The 12Z model consensus was slightly colder. The 12Z GFS/GEFS/EPS were all slightly colder both during the 6-10 and 11-15 day periods. But during and just after the GFS/GEFS, the net move was down a few cents and during and just after the EPS it was pretty flat overall. The Euro was slightly warmer but NG was pretty flat during its release. Translation: NG didn't move with any of the 12Z models for all practical purposes other than perhaps for very short periods within.

Thanks Larry,

Closing comments from Natural Gas Intelligence below:

Natural Gas Bulls Fail to Gain Momentum as Outlooks Trend Colder; Spot Gas Mixed

     5:24 PM    

The stars were aligned for natural gas bulls hoping to ride the wave of Tuesday’s gains as weather models continued to trend colder for the late February/early March period. But after hitting an intraday high of $2.689, the Nymex March gas futures contract slid from there, eventually settling Wednesday at $2.636, down 2.6 cents. April fell 2.8 cents to $2.669

Natural Gas Intelligence this morning:

Potential Late-Winter Cold Boosts Natural Gas Futures as Market Awaits EIA Data

     8:54 AM    

Further cold trends in the overnight forecasts and the potential for a larger-than-average withdrawal from weekly government storage data helped lift natural gas futures early Thursday. The March Nymex contract was trading 3.9 cents higher at $2.675/MMBtu shortly before 9 a.m. ET. 

EIA drawdown was -177 bcf..............bullish vs market expectations based just on the price spike higher immediately upon the release, to new highs of 2.701.

Prices have faded a bit since(38 minutes later) then but are still above the levels before the release.

Summary

Working gas in storage was 1,705 Bcf as of Friday, February 15, 2019, according to EIA estimates. This represents  a net decrease of 177 Bcf from the previous week. Stocks were 73 Bcf less than last year at this time and 362 Bcf below the five-year average of 2,067 Bcf. At 1,705 Bcf, total working gas is  within the five-year historical range.

Looks like the EIA report was VERY bullish!

MUCH, MUCH warmer 12z operational GFS and it couldn't push ng prices lower.

EIA Reports 177 Bcf Storage Draw, March Natural Gas Tacks on More Gains

    11:26 AM    

The Energy Information Administration (EIA) reported a 177 Bcf withdrawal from natural gas storage inventories for the week ending Feb. 15, 5 Bcf more than the highest estimate ahead of the report and a whopping 35 Bcf more than the lowest projection.

 I think that the NG market has gotten smarter about the volatility of the GFS and it, therefore, hasn't been reacting as strongly to it as much as it has to the much more reliable ensembles as well as the less unreliable Euro operational. The market has especially been reacting less than it did years ago to the post day 11 or so portion of the GFS because it knows that part will likely change markedly the very next run. Smarter market.

When the 12z GFS came out much warmer on Tuesday, the market plunged from near the highs, to new lows.

Today, the market is keying off of a shocking EIA report. The drawdown was greater than any expectations.

Since the heating season is almost over and we have plenty of ng in storage, the market will often ignore the weather.

At least that's what I've noticed over the last 25 years. 

The market learned much more about the fundamentals on the supply side today(much more bullish potentially), that might be defining it for the next few months that were much more important than how the models are showing a cold wave that will last on the order of days.........and be long gone. 

Prices are still extremely low and seasonals very strong here too. 

Probably not a lot of big traders thinking we have great downside natural gas opportunities left in late Feb on weather that might warm up vs cold forecasts.

So the big shorts that were pressing the downside since December are not in there. 

From NGI this morning:

Overnight Models Drop Some HDDs From Outlook; Natural Gas Futures Called Slightly Lower