The heat will once again be centered in the center of the country in week 2, while the east is not so hot.
Models this morning are not quite as hot as yesterday morning, especially the European ensembles that had huge heat in the East yesterday morning. The East and South are key areas for residential heating and cooling. To be real bullish, the extreme anomolies should effect that area:
NWS weather guidance for the 8-14 day forecast:
Natural gas spiking to a high yesterday, just shy of $3 and below the Jan 31 spike high, could look like a double top if we can't get back higher.
Seasonals turn negative here.
The bullish EIA reports vs expectations recently have been a big reason for price strength. Not sure if that is dialed in below $3 but it might be if we don't shift the heat farther east to the East Coast.
Injections will be low this Summer if the heat is widespread to the East Coast. Storage is pretty low here, so injections need to be above historical averages for the next 6 months to catch up.
The chart below is July Natural Gas for the past year:
https://www.nasdaq.com/markets/natural-gas.aspx?timeframe=1y
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May 31, 2018
The Energy Information Administration (EIA) reported a weekly storage injection that came in lower than most estimates and the five-year average, giving further momentum to a natural gas futures market already higher overnight on hotter weather trends.
EIA reported a net 96 Bcf injection into Lower 48 gas stocks for the week ending May 25, more than the 80 Bcf build recorded last year but less than the five-year average 97 Bcf injection.
As the figure crossed trading desks at 10:30 a.m. ET, the July contract -- already up more than a nickel overnight with forecasters pointing to a more supportive long-range temperature outlook -- jumped another 3.5 cents to just under $2.990. By 11 a.m. ET, July was trading around $2.977, up about 9.2 cents from Wednesday’s settle.
A Reuters survey of traders and analysts on average had predicted a 102 Bcf injection, with responses ranging from 88 Bcf to 107 Bcf. A Bloomberg survey had produced a median 102 Bcf injection, with responses from 96 Bcf to 107 Bcf. ION Energy had called for a 105 Bcf build, while Price Futures Group had estimated a build of 101 Bcf. The Intercontinental Exchange EIA Financial Weekly Index settled Wednesday at an injection of 104 Bcf.
“We see this print as slightly bullish, with both noisy production and burn estimates indicating either burns were a bit more impressive or production recovered less than expected,” Bespoke said following the report’s release. “Either way, such a print puts $3 in play today and indicates a marginally tighter market than expected, which adds support as we were already rallying off impressive heat risks in the long-range.
“We do note that we are still solidly loose to the five-year average, and this print was a touch looser to even 2018 on balance, so with average weather the market has far to fall, but this print confirms we can run on heat.”
Total working gas in underground storage as of May 25 stood at 1,725 Bcf, versus 2,513 Bcf a year ago and five-year average inventories of 2,225 Bcf, according to EIA. Week/week, the year-on-year storage deficit shrank from 804 Bcf to 788 Bcf, while the year-on-five-year deficit increased slightly from 499 Bcf to 500 Bcf, EIA data show.
If injections average 21 bcf/week higher than the 5 year average and CDD are near the 5 year average, storage will just reach the 5 year average 11/1/18. Not going to be easy and will be very difficult if June-Aug turn out hot.
It appears that NG got a boost from quite warm/warmer models for the 2 week forecast this afternoon.
Wow, the CDD came in at 60, which is the highest on record for Mem. Day week back to 2000 as well as the earliest in the season 60+ going back at least to 2000! This 60 is a whopping 28 above normal and is normal for late June. Also, it is an increase of 29 over the prior week. All of this in combination with history back to the early 2000s tells me that despite the normal demand reduction due to the holiday week, itself, and that week having had the highest injection when averaged out over the years, the EIA injection for this Thursday will very likely be lower than the prior week, which was 96. There's a good chance it will be only in the 80s and even a slight chance for high 70s. I hope to post more details backing this reasoning within the next day or two. Needless to say, the deficit vs the 5 year average will very likely rise significantly as the 5 year average is near +104. That would then raise what's needed in order to reach the 5 year average by 11/1 to an average of 24 bcf/week above the 5 year average injection assuming CDDs near the 5 year average. For traders, the main question is whether or not this is largely dialed in.
Thanks Larry,
Most models for week 2 have turned down the heat and some even look coolish thought the last GFS is a bit hotter again.
Was thinking late Fri and Sat that NG would gap higher tonight and maybe trade above $3 based on how hot the models were then.............but overnight and earlier today they cooled off enough to cause ng to be weak/a bit lower in early trading.
After the hotter 18z GFS came out, the ng had a few ticks worth of support. We opened on the highs, which is where I sold a couple but got out right away.