I'm estimating the following for 12Z Sun vs 12Z Fri runs in terms of HDDs:
- GEFS: ~6 warmer (warmer 12/23-8, colder 12/29-1/1, warmer 1/3-5)
- EPS: ~25 warmer (warmer 12/25-1/4)
As Mike noted: models had been colder for early Jan as of yesterday but now they're warmer.
Despite the short specs, very bullish EIA, and pretty cheap prices, I'd think NG would open down unless 18Z GFS comes in colder.
Thanks for getting us started again this week Larry!
I agree completely. It would be a big surprise if natural gas does not open lower.
Based on some of the wild opens we often have at this time of year, that seem to feature selling and buying at the market on the open vs pricing the order, which dominates the majority of trading, we can't rule out a surprisingly sharply lower open...even a gap lower.
However, even though the forecasts are now warmer than Friday, it's not like we were trading cold and there is a pattern change to warm. It's more of the current pattern of warm dominating longer..........into early January(as well as being warmer before then) vs speculating that cold was coming early in January on Friday, which looks shaky now.
As Larry mentioned, there are bullish elements to the story......seasonals, low prices and exhaustion gap reversal earlier this month on the charts and a huge one...........record fund shorts.
That last one is interesting this week because the front month, January expires.
Expiration of the front month at this time of year can cause price volatility as we approach expiration. What is the open interest in the front month of that record large spec short that might need to cover(buy)? That could be supportive...........However, widespread, near record warmth over the key high population areas of the Midwest and East this week could pressure cash prices and try to pull the price downward towards expiration(I really don't know but its possible).
Usually, its time to start trading February this week because its get much more volume but if we had a sudden turn to extreme cold overnight and Jan spiked from funds covering their shorts, the Jan would have the biggest payoff.........same if it spikes down on warmth and fund covering is not a big deal.
Just be aware that expiration is coming up on Friday, the 27th. Maybe the holiday could affect trading too.
OK, we got the fairly sharp drop on the open, enough to provide a gap lower. This could be a downside breakaway gap unless we can trade back above Fridays low.
Volume on the January and February contracts are almost the same so far tonight(Feb will start having much higher volume, maybe starting tomorrow or Tue).
The Jan high tonight was 2.269, the low on Friday was 2.279 so the prices in between are the gap lower.
If maps turn sharply colder at some point this week, that gap should get filled but right now, its telling us that the market views the picture more bearish than at any point of trading on Friday...........exclusively because of the milder temperatures in the forecast.
It looks like the Feb volume is going to beat Jan volume, so I'll try to shift attention to the Feb. The low on Friday was 2.270 and tonights high was 2.256 for a 14 tick gap lower.
Given that it's Christmas. And the Jan contract expires thursday. And the thought that the EIA report will probably be quite bullish come January due to the mild cold snap they will get. Shorts will be buying out for the rollover, and perhaps moving up or sideways in anticipation of the EIA reports.
JMHO
Thanks Mark,
Actually NGF expires the 27th as mentioned earlier which is Friday, not Thursday.
Also, these very mild temperatures on the latest forecast models will cause BEARISH EIA reports in early January, which is why we gapped lower tonight.
The one that covers this very mild week will be released Jan. 2nd. Regardless of whether its more or less than the market expects, it will have a very small withdrawal compared to average..............with certainty. The one after that on Jan 9th, which will cover next weeks weather will have a bigger injection from colder weather but temps still don't look that cold.
The latest weather forecast is NOT a reason for funds to cover their record shorts. It must turn colder, like it did late last week and yesterday but the last 24 hours has featured a bearish change in the weather.
Funds could cover alot of January contract shorts this week because they have to get out with expiration (not sure what the open interest is right now) but if it stays mild, they might just roll them forward to stay short..........especially if we can't generate some much colder weather maps this week..............which is still very possible.
Monday Morning from Natural Gas Intelligence:
Warmer Momentum Rules’ in Weekend Guidance as Natural Gas Futures Tumble
8:53 AM
A much warmer outlook for late December and early January temperatures had natural gas futures trading sharply lower coming out of the weekend. A little after 8:30 a.m. ET Monday, the January Nymex contract was trading 11.0 cents lower at $2.218/MMBtu.
metmike: Big spec/funds that have record shorts are getting a huge Christmas present!
Despite much milder temps, ng does not want to get below $2.21 today...........so far at least.
Mondays mild weather:
Well, I got the drop I was looking for. Sold a 20 delta put. Here's to hoping it can stay above 1.9958. I'm actually hoping for a small rise to get out before the report.
The contract low for NGF is 2.159 and for NGG is 2.168.
If the forecast stays this mild, those levels will probably be breached.
With near record warmth this week and mild forecasts, a spike below that could happen at any time.
It might depend on the dynamic of the record short fund position and whether there needs to be a great deal of buying to get out of the front month before it expires on Friday.
12z Weather models showed a bit more cold at the end of week 1, early week 2 which caused a dead cat bounce briefly but the overall pattern has the extreme cold locked up in Canada with mild Pacific flow as far out as the models go.
A pattern change to much colder would make this a great buying set up but just the opposite has been happening with the weather updates the last 2 days..........they keep getting milder and the colder look late Saturday on the GFS products was a big fake out.
I will note that although we are SHARPLY lower, there seems to be enough buying at these lower prices today to keep them from collapsing lower. We are at the lows of the day again as we get ready to close, which is pretty bearish but those lows were set this morning at 9am and we managed to stay above that all day.............quite a feat with a forecast this bearish.
If this had been November and at higher prices with this same forecast, no way would we not have continued to make new lows all day..........ok, we just cracked the morning lows and hit a slew of sell stops.
One has to wonder if ng can trade below $2 with this forecast continuing or will prices just get too low?
I'm thinking we will flirt with $2 NGG based on the forecast. But I have to believe at some point we will see a spike with a colder forecast. I have 36 days to be correct and collect around $15 per day in theta. I like selling puts when NG is this low because it gives me time to be right. I watch it close everyday and if it continues to tank I'll get out before it is a big loss.
Thanks for sharing your trade and strategy with us again Grant.
It’s almost impossible for me to sell down here this week (yesterday evening...yes) though weather this mild in the middle of Winter is about as bearish as it gets.
There is some unknown risk unrelated to weather with the contract expiration coming up on Friday and as Larry told us last week, large specs having record shorts.
Maybe they got to cover Some of that today with their buying being a factor in keeping ng prices pretty steady much of the day instead of doing a more typical collapse to new lows with a forecast this warm in the winter.
Down $1,000/contract was still pretty significant and bearish though.
The last Euro 768 hour forecast has some decent cold in weeks 3 and 4 but I doubt that will get much attention, especially since the HDDs for the 45 day weeklies are actually less cold for that time frame vs the previous run last week.
A big change to much colder would make buying down here a home run type trade and with fairly low risk because we are so cheap, we have dropped so much, the funds are very short......and less likely to pile on with more shorts way down here, especially if it turns cold and the market is trading very mild, with no models showing cold in the next 2 weeks.......so adding a bunch would maximize the punch.
The difference between expectations from point A to point B is often a good indicator on judging its affect on trader psychology and potential price reaction.
With point A right now being so warm, it gives us more potential distance to point B if it turns cold.
If temperatures were close to average right now instead, we would not have to go as far price wise to dial in scenarios featuring colder than average.
Regardless, selling options the way that you do, especially on volatile spikes that maximize the cost/value to purchase them.......which allows you to be short with tons and tons of cushion is what some of the smartest traders do.
On a day like today, when the bearish news almost can’t get any more bearish was a good day to sell the puts.
Why somebody would be buying puts down here makes no sense to me.
Like you said, they would need to either spike in their favor right away or we would need prices to get below $2 close to expiration for it to make money.
Natural Gas Intelligence Tuesday Morning:
Milder Trends Continue in Forecasts as January Natural Gas Called Lower
8:57 AM
Continued milder trends in the latest weather data had natural gas futures trading lower early Tuesday, following through on a sharp sell-off from the previous session. At around 8:40 a.m. ET, the January Nymex contract was down 3.6 cents to $2.178/MMBtu.
metmike: Markets close early today. Front month is diving lower, near contract lows set a couple of weeks ago, on the Sunday Night panic/market selling open that was immediately met with buying(rejected).
2.158 is the NGF contract low.
2.169 is the NGG contract low.
Tuesday Weather:
Wednesday Weather: https://www.marketforum.com/forum/topic/44838/
Canada will turn frigid during week 2. The possibility of some of that frigid air moving south is a bit bullish here early on the evening of Christmas Day.
Best chance for entry into the US is in the West to Plains.
Speculation on this is mainly affecting the Feb contract because the Jan contract expires on Friday and is feeling the pressure of near record warmth right now and lack of residential heating demand in the high population centers of the Midwest/East/South........but could end up spiking much higher if there is alot of late short covering.......you never know on the last 2 trading days for the January contract.
February has the bearish gap lower from Sunday evening at 2.256(top of the gap-Sun/Mon high) to 2.270(bottom of the gap-Fridays low).
That is serving either as a breakaway gap lower..........if prices continue to drop from here........which would require January to stay mild.
Or an an exhaustion gap.......if it gets filled because the weather pattern turns sharply colder.
Considering how cheap prices are, how mild its been and last Friday's low of 2.180, looked like a test of the 2.169 low on Dec. 9, that held (at that time-just after Dec. 9, we put in a gap and crap/exhaustion gap lower that was filled........and looked like THE bottom- until temperatures turned mega warmer and we negated that by trading back down below that gap again with the new gap lower 3 days ago mentioned above,.......if the models start bringing some of this extreme cold in Canada in week 2 down here, then its a good buying set up.
Sounds confusing, eh? as Wayne from Canada would say.
I almost forgot that the EIA report is out at 9:30 am tomorrow(seems like a Sunday) and I didn't update our ng graphs yet this week.
The last EIA report was very bullish. If tomorrow's is bearish and temps are still mild, we can quickly blow thru the contract lows.
for week ending December 13, 2019 | Released: December 19, 2019 at 10:30 a.m. | Next Release: December 27, 2019
| Working gas in underground storage, Lower 48 states Summary textCSVJSN | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical Comparisons | |||||||||||||||||||||||||
| Stocks billion cubic feet (Bcf) | Year ago (12/13/18) | 5-year average (2014-18) | |||||||||||||||||||||||
| Region | 12/13/19 | 12/06/19 | net change | implied flow | Bcf | % change | Bcf | % change | |||||||||||||||||
| East | 838 | 867 | -29 | -29 | 698 | 20.1 | 808 | 3.7 | |||||||||||||||||
| Midwest | 973 | 1,013 | -40 | -40 | 847 | 14.9 | 972 | 0.1 | |||||||||||||||||
| Mountain | 186 | 193 | -7 | -7 | 154 | 20.8 | 193 | -3.6 | |||||||||||||||||
| Pacific | 273 | 276 | -3 | -3 | 229 | 19.2 | 305 | -10.5 | |||||||||||||||||
| South Central | 1,142 | 1,168 | -26 | -26 | 865 | 32.0 | 1,142 | 0.0 | |||||||||||||||||
| Salt | 319 | 321 | -2 | -2 | 263 | 21.3 | 335 | -4.8 | |||||||||||||||||
| Nonsalt | 823 | 847 | -24 | -24 | 602 | 36.7 | 807 | 2.0 | |||||||||||||||||
| Total | 3,411 | 3,518 | -107 | -107 | 2,793 | 22.1 | 3,420 | -0.3 | |||||||||||||||||
Totals may not equal sum of components because of independent rounding. | |||||||||||||||||||||||||
Working gas in storage was 3,411 Bcf as of Friday, December 13, 2019, according to EIA estimates. This represents a net decrease of 107 Bcf from the previous week. Stocks were 618 Bcf higher than last year at this time and 9 Bcf below the five-year average of 3,420 Bcf. At 3,411 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.
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.
https://www.investing.com/economic-calendar/natural-gas-storage-386
Latest Release Dec 19, 2019 Actual-107B Forecast-90B Previous-73B
| Release Date | Time | Actual | Forecast | Previous | |
|---|---|---|---|---|---|
| Dec 19, 2019 | 10:30 | -107B | -90B | -73B | |
| Dec 12, 2019 | 10:30 | -73B | -76B | -19B | |
| Dec 05, 2019 | 10:30 | -19B | -22B | -28B | |
| Nov 27, 2019 | 12:00 | -28B | -89B | -94B | |
| Nov 21, 2019 | 10:30 | -94B | -89B | 3B | |
| Nov 14, 2019 | 10:30 | 3B | 45B | 34B |
Temperatures for last Thursday's EIA 7 day period ending Dec. 13.
Frigid far Upper Midwest/N.Plains chilly Northeast.
Mild elsewhere.
Temperatures for FRIDAY"S EIA report. 1 day later this week.......thanks Grant!
Dec. 25th:
Regarding seasonality, price strength often seen in early/mid Dec. fades in late December and seasonals are actually lower/weaker from late December thru mid February, when prices often start their very reliable seasonal increase in the Spring. Temperatures will matter more than these historical tendencies during January.
Dec. 16th:
I'm repeating my comments from last week below because they explain some of the recent strength in NG prices, despite the lack of bitter cold:
Dec. 9th:
The main thing about the seasonal graph below to know is that prices in late November ALWAYS go down when its mild and almost always go down with average temperatures.......this happened in 2019.
In early/mid December, however, seasonals turn positive, which is lending some support here(along with extremely low prices and lots of warm dialed in)
This seasonal price chart below is for 2 decades, ending back in 2009.
The price chart below is for the front month January.
Dec. 9th:
Natural gas 3 months below
Record heat in September caused the spike higher.
Record cold in early November caused the spike higher to end Oct/early November.
Now we have a distinct double top, that will not be violated any time soon and only if the 2nd half of Winter featured sustained brutally cold temperatures.
We are easily at contract lows with the massive daily and weekly gap lower Sunday PM not showing up on the chart below but described on the 2nd post of this thread.
This gap was filled and served as an exhaustion gap formation (gap and crap) at the end of a strong price move lower. Which suggests the market will be unable to make new lows for awhile.
Dec. 16th:
The gap and crap exhaustion early last week, along with strong seasonals and very low prices has been signalling higher prices. A big sign of this has been the markets refusal to go lower during and after some key guidance has come out much milder. A long time bearish market that stops reacting to bearish news has often hit a bottom(at least short term). If it get warms enough for long enough, prices can still make new lows but the market psychology has changed/reversed since the open on Sunday Night, Dec 8th when we had a panic selling surge on the open that caused a massive gap lower. Last Tuesday had some lingering selling enthusiasm but now, the market is putting a more bullish spin on the weather(often ignoring bearish wx and focusing on bullish wx potential)
Dec. 25th. The price chart below does not show the new, bearish gap lower from this last Sunday Night, which negated the gap and crap selling exhaustion from the previous week, as we are trading below that now and the Sunday gap is still wide open. We tested the contract lows on Friday.......and they held solidly.
On Dec. 9th we spiked down to 2.158, the contract low. On Friday, we dropped to 2.162 on the January contact..the test. We are at 2.213 right now. We got to 2.188 earlier this evening but bounced nicely off there.
Actually, there's numerous factors that could jerk us quickly in one direction if they line up.
1. EIA report out Friday
2. Contract expiration Friday
3. Seasonals turn modestly lower here to mid Feb. -minor short term factor
4. Cheap prices
5. Record fund short
6. Weather, weather, weather..........big changes in weather will get more weight than the others combined.
Is the report tomorrow? I thought I read it was the 27th this week.
No matter when it comes out, it's going to be bearish. I see traders positioning for exactly that tonight.
Grant,
Thanks very much for correcting me, I assumed wrong. The report is Friday, not Thursday.
With expiration of the front month, January also Friday.
I note this evening, after the January was much weaker than the February contract, it's about caught up.
Both up modestly.
The 0z GFS products were nothing to write home about vs previous runs....pretty close.
During week 2, however some frigid air will be getting dumped into Canada and heading south, the southern edge likely to cross the US border, at around the N.Rockies/N.Plains for the entry point.
How far south can that cold get?
NGI:
January Pattern Shifts Colder as Natural Gas Futures Called Higher
8:55 AM
A colder shift in the latest forecasts starting around the second week of January had natural gas futures bouncing back from pre-holiday losses early Thursday. The January Nymex contract was up 8.4 cents to $2.256/MMBtu shortly after 8:30 a.m. ET.
Thursday weather:
We barely filled the downside gap from Sunday Night.
I bought my put back for a decent win.
Short and sweet!
NGI after the close on Thursday:
Natural Gas Bears ‘Hibernating’ in Post-Christmas Surge; Cash Mixed
5:43 PM
Technical trading may have had a hand in sending natural gas futures sharply higher after the Christmas holiday. Despite a shift to the colder side in long-range weather outlooks, the intensity of Thursday’s rally indicated other factors may have been at play. The January Nymex gas futures contract surged 12.2 cents to settle Thursday at $2.294/MMBtu. February jumped 9.8 cents to $2.285.
NGI Friday:
Natural Gas Futures Reverse Course on Demand Losses in Overnight Guidance
8:58 AM
In a sharp reversal from gains recorded the previous session, natural gas futures were trading lower early Friday amid demand losses in the latest guidance. The expiring January Nymex contract was down 7.9 cents to $2.215/MMBtu at around 8:30 a.m. ET, while February was trading 6.8 cents lower at $2.217
metmike: Great cover by Grant with his short put yesterday. Models MUCH milder overnight.
for week ending December 20, 2019 | Released: December 27, 2019 at 10:30 a.m. | Next Release: January 3, 2020
| Working gas in underground storage, Lower 48 states Summary text CSV JSN | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical Comparisons | |||||||||||||||||||||||||
| Stocks billion cubic feet (Bcf) | Year ago (12/20/18) | 5-year average (2014-18) | |||||||||||||||||||||||
| Region | 12/20/19 | 12/13/19 | net change | implied flow | Bcf | % change | Bcf | % change | |||||||||||||||||
| East | 796 | 838 | -42 | -42 | 678 | 17.4 | 782 | 1.8 | |||||||||||||||||
| Midwest | 923 | 973 | -50 | -50 | 821 | 12.4 | 938 | -1.6 | |||||||||||||||||
| Mountain | 177 | 186 | -9 | -9 | 150 | 18.0 | 186 | -4.8 | |||||||||||||||||
| Pacific | 260 | 273 | -13 | -13 | 224 | 16.1 | 295 | -11.9 | |||||||||||||||||
| South Central | 1,094 | 1,142 | -48 | -48 | 858 | 27.5 | 1,118 | -2.1 | |||||||||||||||||
| Salt | 309 | 319 | -10 | -10 | 272 | 13.6 | 329 | -6.1 | |||||||||||||||||
| Nonsalt | 786 | 823 | -37 | -37 | 586 | 34.1 | 789 | -0.4 | |||||||||||||||||
| Total | 3,250 | 3,411 | -161 | -161 | 2,732 | 19.0 | 3,319 | -2.1 | |||||||||||||||||
Totals may not equal sum of components because of independent rounding. | |||||||||||||||||||||||||
Working gas in storage was 3,250 Bcf as of Friday, December 20, 2019, according to EIA estimates. This represents a net decrease of 161 Bcf from the previous week. Stocks were 518 Bcf higher than last year at this time and 69 Bcf below the five-year average of 3,319 Bcf. At 3,250 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.
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.
Weather Friday: Warmer
EIA Reports Another Triple-Digit Storage Draw; Prices Plunge Anyway
11:18 AM
For the second week in a row, the U.S. Energy Information Administration surprised the natural gas market with a much larger-than-expected.
That plunge was very nice. Sold a put and just bought it back for a nice gain.
Very nice grant!
Saturday weather(the same to a tad colder):
Weather Monday........a bit milder...........cold snap is very short lived.
Natural Gas Intelligence Monday early:
Short-Lived January Cold Blast Disappoints as Natural Gas Futures Called Lower
·
With December 2019 being the 4th warmest dating back to 1960, here's the historical December values. There's been a significant downward trend since 1960 (Decembers are becoming warmer across the Continental U.S. with time). This is a climate change signal.
metmike: So is this a good thing or a bad thing?
As has been the case on and off for the last couple of weeks, today is a day when nonwx factors seem to be propping NG up so far. It is down but not down all that much as of yet considering the mild late week 2.
Maybe it is a matter of the market not believing late week 2 since the models have been horrible in week 2.
Agree Larry.
I think prices are already very low (not far from contract lows) and the last 2 EIA reports were actually bullish, along with the funds having record shorts make aggressive selling down here less inviting then when we were almost 7,000/contract higher back in October or almost 5,000/contract back in November(spike highs).
The downside potential from 2.200 is????
Certainly we can drop below $2 if it stays mild for the next month but how far into the land of prices that start with the number 1 will we go?
Anything is possible, including a collapse lower than expected if heating demand was very low during the 2nd half of Winter and supplies ended up being in a glut but we've already dropped 7,000/contract in 2 months, probably from funds piling on the shorts on the way down, as they always do.
In an hour if the EE comes out extremely mild, maybe we will see ng crashing lower and this was just a pause because there is actually some frigid air heading into parts of the US early in January.
Maybe another way of looking at it is that its certainly warmer in week 2 in the forecast than as recently as Saturday but its not like we are coming out of a cold/bullish period to warmer..........we are coming out of a huge record warm period to a forecast thats not as cold as it was.
So the change is not as great as Oct/Nov when we went from record cold to MUCH warmer.
NGI after the close on Monday:
Natural Gas Futures’ Decline Puts March/April Spread to Within Penny; Cash Rebounds
5:27 PM
After struggling to hold their head above water, natural gas futures sank Monday as sustained cold weather remained absent from long-range forecasts. The February Nymex gas futures contract, in its first day in the prompt-month position, settled at $2.186/MMBtu, down 4.5 cents from Friday’s close. March slipped 1.6 cents to $2.157
metmike: How much lower can we go from here?
Weather Tuesday:
https://www.marketforum.com/forum/topic/45064/
Correction: Regular hours today. Closed on New Years Day.
It continues to look just about as bearish as can be from a weather standpoint as far as the somewhat reliable weather eye can see (say, 2 weeks). That being said, it will cool off in the E US in the means at some point. For one thing the MJO, which is forecast to be in the mild, SE ridge favoring strong phases 4 and 5, will eventually come out. This will almost certainly happen at some point in late January.
NGI after the close on Tuesday:
‘Heavily Overweight’ Shorts May Be Behind Natural Gas Futures’ Bounce to Close Out 2019; Cash Drops
Although eager to put 2019 in the rearview mirror, natural gas bulls managed to close out the year on a slightly positive note, sending futures a few ticks higher during the final trading session of the decade. The February Nymex gas futures contract settled Tuesday at $2.189/MMBtu, up three-tenths of a cent from Monday’s close. March rose just .001 cents to $2.158.
Wed AM:
metmike: The 12z guidance Tuesday was a bit colder late in week 2 which seemed to be the reason for the reason for the bounce to close a few ticks higher after setting life of contacts lows of 2.151.
Overnight models did not continue that trend. There is frigid air coming south from Canada but the entry point is too far west to be bullish, since the high population centers and highest heating demand for ng is in the Midwest/East/South.
We have a solidly -PNA pattern thru the period which strongly favors the cold to continue in the West and to have a tough time staying in the East, other than brief intrusions. Also a +AO(that does drop late) and +NAO that drops close to 0 late. We need those last 2 indices to be, at least close to 0 if not negative to give the frigid air a chance to last in the Midwest/East.
The trend for them to move in that direction at the end of 2 weeks and the AO has a couple solutions going negative and with the massive upper level ridge in the Northeast Pacific being the main feature and forecast to strengthen and build northward, likely connecting/extending to Siberia..........establishing a cross polar flow into Canada and a down steam trough in the mid latitudes.........which will be ideal for the most frigid air on the planet to dump south via the Siberian Express.
The entry point is in the West with a stout upper level ridge in the East trying to hold it back. Seems to me that based on the past, the ridge in the East often loses the battle in the end to the more powerful northern stream and....it's going to be difficult to hold back this massive amount of bone chilling air.
Look at the magnitude of the upper level height anomalies below at 2 weeks. The building positives/northeast Pacific and negative/downstream couplet, with 100% certainty, anything close to this will drive Arctic/Polar air south. This is the most important dynamic going on. Almost as important is the modest positive anomaly in the East. This is what will be holding back the lions share of cold and making spurts of the cold eastward brief...if it weakens, the frigid air will come in bodily/eastward and stay for longer and be very bullish.
So while the forecast is bearish with regards to HDD's in the Midwest/East because of the modest ridging, we are a stone's throw (on a global scale) at 2 weeks of it becoming very bullish.
Do note that this pattern will feature some MAJOR Winter Storms and feet of snow in the cold sector........with the contrast in temps and jet stream providing tons of energy, along with the deep upper level trough and moisture flowing in from the ridging to the East.
The heaviest snows will be in the West but possibly in the Upper Lakes to far Northeast where the southern edge of the cold/boundary has a chance to settle south and be overrun by moisture.
This is also the ideal set up for ice/freezing rain, with the more dense, bitter cold at the surface, pushing southeast with north winds at lower levels and undercutting the warmer/moist air aloft, where a southerly(south to north) component to air movement exists.
NCEP Ensemble t = 360 hour forecast
NCEP Ensemble t = 360 hour forecast
Mike,
For the last couple of weeks, there has been a tendency imo for NG to not fall as much overall as the overall very bearish wx forecasts would suggest. I think it is due largely to there being too many speculative shorts. Had there not been so many shorts, I think NG would have dropped a good bit more. I think that is much of the reason for the 12/31 price action.
Agree strongly Larry!
I discussed this on Monday in detail and previously. We have dropped a tremendous amount in just 2 months. Funds have record shorts way down here.
When we were 7,000/contract higher in late Oct, then 5,000/contract in late November and went from record cold to record warmth, there was great incentive to pile on the shorts.
Below 2.2 on the price would mean dropping to 1.5 to have the same potential as late October.....with funds already record short. No way are they going to sell the same way.
One would think we will open lower later this afternoon.
I'll be at the movies and miss it unfortunately. Going to see that Mr. Rogers movie.
As you mentioned Larry, the forecasts are mild and bearish, however, the European Ensembles is increasing the threat of the Arctic cold shifting southeast later in week 2.
I still think that there is a good chance for the northern stream to eventually win that battle by mid January and the cross polar flow dumping the cold into Canada, which will be the source region of the air masses that makes it a threat for extreme cold.
EIA report is out Friday and will have a small withdrawal which is dialed in we assume.
I’ll have the temp map later.
The movie was sold out...........bummer.
We'll get tickets in advance for Saturday.
We did open slightly lower and went down to 2.171, then back up to the open around 2.180.
A slight change in the forecast that lets the cold air plunge southeast overnight would be pretty bullish.
OK, now we just ticked to new highs 2.183.
NGI Thursday Morning:
Warmer Trends Continue as Natural Gas Futures Called Lower
Models getting colder late in week 2.
I don't think the models are getting cold enough to make a change. And as production is still strong, it may not.
I have noted that NG has arrived at the lows set back on Dec 9. So, maybe...
Mike,
Note that when that NGI article was written, NG was still up at 2.176 at 8:40 AM ET, down only 1.3 cents and that it had actually hit the session high of 2.188 at 7:30 AM. So, for whatever the exact reasons, it was once again struggling to drop despite very bearish 15 day forecasts. Then finally later in the morning, it fell rather significantly and it hit a session low to that point of 2.119 at 11:37 AM ET.
Thanks for noting those exact prices Larry. I've been tracking it real close too.
Hard to stay up most of the night when key model guidance is coming out and also during the day. I usually just set my alarm clock several times and take naps between models.
All the ensembles are getting colder in week 2, especially late. This includes the GFS, Euro and Canadian models.
I am looking for forecasts to start adjusting to this but the very mild temps before this and the very bearish EIA number tomorrow and negative seasonals in January appear to be too much vs something that far out and us approaching the mid way point in Winter, with the ability of HDD's only half as powerful in drawing down storage as in early Winter..........should that define the rest of Winter.
If week 2 keeps getting colder, I am thinking that ng will not keep going much lower than this.
I will guess that if the EE comes out colder in week 2, that the lows are in for today and we can get back up to the previous lows of 2.151 from earlier this week, then 2.169 from Dec. 9th..........but only if it keeps getting colder.
We are having a potential washout here and the old expression "don't try to catch a falling knife" comes to mind.
I actually went long after the 6z GFS ensemble was colder in week 2 shortly after 5am with a tight sell stop and we had a nice bounce but the market shrugged that off in a big way when we had the big traders controlling the trading a couple hours after that and we saw the typical piling on of the selling by the funds(guessing based on the price action).
Addition: The 12z GFS guidance had some colder temps that gave ng a dead cat bounce again (unreliable operational model the most) but the market is back near the lows with the 12z Euro having less HDD's during week 1......still coming out in week 2 now.
For the EIA report tomorrow, we will be using one of the most bearish 7 day temperature periods in Winter history. The drawdown will be one of the smallest for that period.
Look at the incredible positive anomalies below. Wow! +16 deg. F in Chicago vs average for the entire week.
We spiked thru the earlier lows of 2.119 down to 2.116 back bounced right back above them immediately.......maybe from the week 2 part of this 12z Euro coming out quite a bit colder looking. It only goes out to 10 days though.
Larry,
Do you have any market estimates for the wimpy EIA number tomorrow?
Thursdays weather:
https://www.marketforum.com/forum/topic/45198/
Milder the first week, colder in week 2.
NGI closing comments Thursday:
‘Exceptionally Bearish’ Weather Keeps Pressure on Natural Gas Futures
5:36 PM
A seemingly unwavering warmer-than-normal pattern through the first half of January continued to pressure natural gas futures lower as traders returned to their desks to kick off 2020. The February Nymex contract slid 6.7 cents to settle at $2.122/MMBtu Thursday, near the session’s low of $2.116. March settled at $2.093, down 6.5 cents.
Mike asked:
"Larry,
Do you have any market estimates for the wimpy EIA number tomorrow?"
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Mike,
The WSJ mean guess is -61. Keep in mind that this was for a major holiday week, which normally has less withdrawn per HDD than a non-holiday week.
Thanks Larry.
Since the last 2 weeks were bigger than expected drawdowns, it will be interesting to see if this will be a 3rd week.
Seems like in the past, when we have weather extremes, the drawdown is often greater than expectations when its extreme cold and smaller than expected when its extreme warmth but maybe thats my imagination.
This site has -57 BCF
https://www.investing.com/economic-calendar/natural-gas-storage-386
| Release Date | Time | Actual | Forecast | Previous | |
|---|---|---|---|---|---|
| Jan 03, 2020 | 10:30 | -57B | -161B | ||
| Dec 27, 2019 | 10:30 | -161B | -148B | -107B | |
| Dec 19, 2019 | 10:30 | -107B | -90B | -73B | |
| Dec 12, 2019 | 10:30 | -73B | -76B | -19B | |
| Dec 05, 2019 | 10:30 | -19B | -22B | -28B | |
| Nov 27, 2019 | 12:00 | -28B | -89B | -94B |
I had been speculating that the week 2 models would keep getting colder and we might be near the lows but the last week 2 GFS ensemble 18z run went the opposite way.
It really looked warm to the the last time frame.......384 hours.
The -PNA and strong Southeast ridge must weaken for enough sustained cold to affect the Midwest/East to become bullish.
-58 BCF a tad bearish to neutral
| Working gas in underground storage, Lower 48 states Summary text CSV JSN | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Historical Comparisons | |||||||||||||||||||||||||
| Stocks billion cubic feet (Bcf) | Year ago (12/27/18) | 5-year average (2014-18) | |||||||||||||||||||||||
| Region | 12/27/19 | 12/20/19 | net change | implied flow | Bcf | % change | Bcf | % change | |||||||||||||||||
| East | 771 | 796 | -25 | -25 | 663 | 16.3 | 758 | 1.7 | |||||||||||||||||
| Midwest | 905 | 923 | -18 | -18 | 801 | 13.0 | 904 | 0.1 | |||||||||||||||||
| Mountain | 173 | 177 | -4 | -4 | 147 | 17.7 | 180 | -3.9 | |||||||||||||||||
| Pacific | 251 | 260 | -9 | -9 | 220 | 14.1 | 287 | -12.5 | |||||||||||||||||
| South Central | 1,093 | 1,094 | -1 | -1 | 875 | 24.9 | 1,101 | -0.7 | |||||||||||||||||
| Salt | 313 | 309 | 4 | 4 | 293 | 6.8 | 329 | -4.9 | |||||||||||||||||
| Nonsalt | 780 | 786 | -6 | -6 | 582 | 34.0 | 773 | 0.9 | |||||||||||||||||
| Total | 3,192 | 3,250 | -58 | -58 | 2,708 | 17.9 | 3,230 | -1.2 | |||||||||||||||||
Totals may not equal sum of components because of independent rounding. | |||||||||||||||||||||||||
Working gas in storage was 3,192 Bcf as of Friday, December 27, 2019, according to EIA estimates. This represents a net decrease of 58 Bcf from the previous week. Stocks were 484 Bcf higher than last year at this time and 38 Bcf below the five-year average of 3,230 Bcf. At 3,192 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.
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.
From Natural Gas Intelligence:
Natural Gas Traders Keep Powder Dry as EIA Storage Number Lands Near Consensus
11:21 AM
The Energy Information Administration on Friday reported a 58 Bcf weekly net withdrawal from U.S. natural gas stocks that came close to
I like the analogy of "keeping powder dry". Pretty accurate if you're waiting for the seasonal uptrend. Too many shorts in the funds. No real cold weather on the maps yet. Plenty of gas in storage. Production good. Hunker down and watch it slide to $2. We could even see 1.60s (2016) again.
This is from the weekly review from NGI.
Natural Gas Forwards Start New Year at New Lows as Weather Remains Unsupportive
4:39 PM
Natural gas forward markets started off the new year and a new decade with little celebration as weather data remained exceptionally bearish, setting the stage for already plump storage inventories to grow further. Led by steep declines in the Northeast, February prices averaged 16 cents lower for the Dec. 26-31 period, while the balance of winter (February-March) fell an average 12 cents.
metmike: As Larry mentioned here this morning: https://www.marketforum.com/forum/topic/45257/
The weather coming up could not get much more bearish.
Despite this, I am looking at this as a potential buying set up...........if/when the market trades a pattern change to colder.
This proved to be a great strategy when the GFS Ensemble was coming out colder for week 2 around 5am, after the market had spiked well below previous contract lows. No way will the selling continue way down here if a bunch of cold is suddenly added to the forecast. At the very least, it will provide a burst of short covering if not actual speculative buying.
That cold must come from the GFS and or EEnsemble since the operational models often show outlying, one time extreme solutions that are out to lunch.
After that extra cold came out, ng was set for a reversal higher.........new contract lows overnight and prices trading well above yesterdays close after the neutral to bearish, non event EIA report came out.
But then the 12z models captured the reality of what Larry mentioned in his morning weather post and did NOT turn colder(which, I think would have given us the reversal higher) so selling pressure resumed.
We did manage to surge to a high of 2.263. Funny thing about perspective and bias with trading. If I wasn't long from earlier in the morning, when prices were $600/contract above/better than my entry point and the updating 12z models came out very mild, I should have been selling and even going short but instead, just put in a tight stop from the bullish bias.
In essence, prior to 4:30am being short paid off nicely. Then, from 4:30-10:15am, buying dips paid off handsomely(being short would have provided a moderate drawdown).
After 10:15 am, being short and/or selling strength worked best.
After the 1:30 pm close we were slightly higher vs yesterday.
2.5 hours later, at the end of the day, we were slightly lower vs yesterday,
So having a position from Thursday's close to Friday's close, whether short or long would not have changed much, even though the price moved strongly in 1 direction during 3 distinct periods.......first down, then up, then back down. The move from the lows to the highs, by far had the most profit potential as a long trade for a day trader but a position trader that is interested in holding on for much longer than that should have stayed their shorts.
Additional stuff from NGI:
Daily comment:
Natural Gas Futures Steady as Market Waits for Signs of Cold
5:47 PM
Also:Are you surprised by these "revelations"? One has to take in mind, that the US has recently acheived an energy independant status. Unlike the Carter years, where there was an oil embargo going on, and gas and related industries were hampered, we are no longer in such a position.
We have become a net exporter of energy. In it's many different factions. So what if the ME is no longer selling us oil? We don't really need them. Just draning their supply.
Thanks Mark.
I have always thought that energy independent is a double edged sword.
The more of their oil we use up, the more we have in the ground..........in storage.
Obviously, us tapping into a massive amount of our oil makes us much less vulnerable to events like this current one.
Without that, oils gains after this assassination would have been much greater.
Weather Saturday:
Weather Sunday.
https://www.marketforum.com/forum/topic/45365/
I'll be leaving for the movies and out until around the open. The weather has so many ups and downs and model changes and differences that I can't even guess where we might open here early in the afternoon.
Some early periods are colder, some late periods warmer. The cold and warm will be gyrating back and forth across the country the next 2 weeks.
