Wow Mark, that looks like an awesome new data source   For MarketForum!!

Thanks for sharing that with us and starting a new natural gas thread.

Previous natural gas thread here:

https://www.marketforum.com/forum/topic/75565/

NG at least appears to partially be up due to significantly cooler models and forecasts vs Fri. I'm talking like an increase of some 10 HDD as of earlier today. And now the 18Z GFS/GEFS was even cooler fwiw. It also appeared to rise some late Fri on a cooler 12Z EPS.

I think you might be on to something Larry!

The 0z GFS E  came out a bit milder and the market dropped a bit.

Still up sharply from Friday though.

Natural Gas Futures Pull Back Early After Initial Rally; Weather Data Trends Cooler

 Volatile natural gas futures probed both sides of even in after hours trading ahead of Monday’s session as the market weighed cooler weekend weather trends against easing domestic storage adequacy concerns. After earlier rallying to as high as $5.799/MMBtu, the November Nymex contract was down 13.5 cents to $5.430 at around 8:50 a.m. ET. Liquefied… 

metmike: Colder than last week but this is what I was afraid of. The market has already come too far and is too high now, so that the arrival of some actual cold, after we've already dialed in a massive amount of cold may not be enough......and this is only SEASONAL COLD with temps closer to average compared to extremely mild for many weeks now.

If we actually hit some much below temps in sustained fashion.........that would be a different, more bullish story. 

Today's action isn't related to weather. You're right that the price is way too high for that. We are coming back off of the European energy crunch. I don't think it will take long before that will not be a factor, and weather will prevail again.

Thanks Mark!

November Natural Gas Prices Tumble to Near $5.50 as Cold Not Yet on Radar; Cash Off

I wouldn't be surprised to see $5 November by Friday.  Traders have to realize that we can only export so much due to physical capabilities.  And another strong injection this week will be a gut punch.  

Bearish Domestic Fundamentals Keeping Pressure on Natural Gas Futures Early

 Natural gas futures extended their losses in early trading Tuesday, with prices skidding double digits amid a bearish outlook for October fundamentals. After stumbling 22.0 cents in the previous session, the November Nymex contract was down another 13.7 cents to $5.208/MMBtu at around 8:45 a.m. ET. The European and American weather models both lost degree… 

metmike: Thanks Jim!

NG has reversed to higher since the article above came out. I wouldn't want to have the job of having to provide the reasons to readers, for NG's movement up and down everyday(-:

Emotion.  Traders saw cold in Europe and buy our NG.  There is no pipeline from the US to Europe.  We have seen the top in the US unless there is a polar vortex in our immediate future.  And there doesn't appear to be.  NG is expensive and it's going to get harder to rationalize that price as the days go by.

Milder European model caused a spike lower here.

Dangerous time to trade with tight stops. 

I was selling when the EE was coming out milder and behind a bit, sold more and thought to risk just above $5.5 but didn't want to put a tight stop in... and then we spiked for a second above $5.5 with no stop and it looked bad...........for a second and  seconds later it spiked lower and I had a profit....got out.

The tight stop would have killed me!

Spiked lower, now we're trying to get back up.

I would GUESS the initial reaction of the milder EE play MIGHT over.

Congrats! No doubt that the warmer 12Z Euro suite was a bearish influence to bring down prices from late session highs but it was initially awfully choppy and kind of reluctant imo almost as if something else bullish (maybe just short covering of recent  shorts??) was countering it. 

https://ir.eia.gov/ngs/ngs.html

Weekly Natural Gas Storage Report

 for week ending October 1, 2021   |  Released: October 7, 2021 at 10:30 a.m.   |  Next Release: October 14, 2021 

                                                                                                                                                                         +118 BCF very bearish!                                                                                                                                                                                                                                                                                                                                                                                                                

Summary

Working gas in storage was 3,288 Bcf as of Friday, October 1, 2021, according to EIA estimates. This represents  a net increase of 118 Bcf from the previous week. Stocks were 532 Bcf less than last year at this time and 176 Bcf below the five-year average of 3,464 Bcf. At 3,288 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 2016 through 2020. The dashed vertical lines indicate current and year-ago weekly periods

  https://www.investing.com/economic-calendar/natural-gas-storage-386

These were the temps for that report.......extremely mild in the center.

These were the temperatures, ending last Friday for this Thursday's report. Extremely mild over most of the country especially the northern half(where most of the HDD's are this time of year).  It was quite a bit milder in the Northeast vs the previous week.

Chilly in the Northwest. 

Should be another huge 100+ injection!

https://ycharts.com/indicators/us_gas_rotary_rigs

Rig count still on the low side....not going up much. 

The low was 68 last July. However, the rig count is only half of what it was in 2018/19. It was already plunging BEFORE COVID hit.

  Funds have a pretty big short position still right now.

They'd been adding to the short position all year, after starting from a net long position but had to cover when we spiked above $6 and probably provided some extra short covering fuel to that spike higher(+13,000 contracts vs the previous week). 

https://www.investing.com/economic-calendar/cftc-natural-gas-speculative-positions-1820

Latest Release   Oct 08, 2021   Actual-133.7K   Previous-146.7K

NG has NOT been following seasonals that closely. Instead, the storage deficit is driving the price, mainly the deficit in Europe during the past month.

October is actually the typical time frame to expect a seasonal high for Natural Gas. More often than not, prices drop between now and the end of Winter and then go up with very high probabilities from there thru early Spring. 

Many people think that Winter makes ng prices go higher. No, natural gas traders/the market dials in Winter BEFORE it comes. Extreme, unexpected cold in Winter that EXCEEDS expectations make NG prices go higher in Winter.........especially when it first shows up in the forecast(when traders dial it in by bidding up prices).

https://seekingalpha.com/article/4160158-natural-gas-seasonal-play-sets-up-for-springtime-option-sellers

Mike,

 I just realized something. The 12Z Euro/Ens is the first 10+ day run incorporating a major update! That MAY explain such a drastic change!

Implementation of IFS Cycle 47r3 - Forecast User - ECMWF Confluence Wiki

Thanks a ton Larry 

I never would have had any idea on the model update. You bring so much value when we have these discussions! Stuff I would never get anywhere else......or others either.

I agree on the action being choppy when the EE was coming out milder. I was expecting it to go straight down and not bounce much from it being that much milder, so I just sold at the market/the bids and didn't pick a bounce price and it caught me a bit off guard when it bounced higher than where I was short from. 

When you have a position on and it's not going your way, it makes you think "oh, oh, I must be wrong and the market doesn't care about what I thought it would care about"

I do believe -5+ HDD's was too bearish for the market to keep ignoring though.

But in this environment, news from something else, like in Europe could have us $1,000 higher or lower in a flash.

I just got back in and will look over the model update information. Thanks so much!

ps Sorry, I missed your earlier comment because I was furiously posting a bunch of other things here.

Is NG going to make a liar out of me, just one week after I stated it seemed like it always is a down day on Wednesday?  I guess I could always claim it's a holiday week.  :)

Thanks Jim!

Can’t be certain of anything with ng.

As long as you aren’t short today at the wrong time......, it’s all good (-:

Natural Gas Futures Stage Late Rally Despite Further Shrinking Expected in U.S. Storage Deficits

12z models were +4 HDD/GFS and +5 HDD European model. NG had already climbed back close to UNCH before that came out but surely it helped after Noon, when that came out.

12z  GFS Ensemble below, came in +4 HDD's/colder and gave natural gas a lift higher.

18z also kept that colder solution but the reality is its LESS MILD, not cold.

                                    Latest weather here:

https://www.marketforum.com/forum/topic/75004/

Mike. If you don't mind my asking. In the trade you mentioned above, Just how "tight" of a stop would you normally put on?

I tend to trade by the 5 minute chart, and keep a stop 5-15 pts below/above the last pullback. Once it gets in the black (covers fees), I don't worry much about where it puts me out. A profit is a profit. And the more it runs, the more I make.

Mark,

For almost 20 years, I almost never used stops. That was when I was extremely selective to extremely sensitive weather markets and had very high confidence with an account well into the 6 figures.(started with 2K in 1992)

I was more of a position trader too that would hold on for up to a week in some cases if the weather stayed favorable and would hang on with drawdowns the first couple of days but almost always ended up right. 

Stops back then would have taken me out with a small loss at exactly the point where I should have added more......or be putting on the trade if I was not already in.

In 2011 MF Global, where I had all my money......went bankrupt on Hallooween 2011. The 10 year anniversary is coming up. Then my new broker, PFG Best went bankrupt on July 2012.

Since then, I've become a day trader with a small account that isn't that good trading anymore.

I often use stops now because I don't have real deep pockets and am wrong enough to justify a stop..........so take my advice with a grain of salt.

I play entirely off of the weather. If the weather change is drastic and we are in December/january, I may trade with no stop........especially if I'm staying awake watching the market the entire time.

But the ng only closes for an hour a day  during the week and models keep coming out around the clock. If I have a position on, I might set my alarm clock a couple of times overnight to get a couple hours of sleep in between model runs. 

In this crazy environment, a big change on a model could mean $2,000/contract real fast. I would definitely want to have a stop in if I was not wide awake while the model comes out. In that case, I let the model tell me what to do.

But I told you everything except what you wanted to know................where to put a stop in(-:

I honestly don't know. 

NG is so crazy and its worse now than ever.  We often have crazy, unexplained spikes in the opposite direction that you would think..........then turn around and go the other way.

Makes me think that they are trading algorithms to take out all the stops of people who are trading based on what the price should do and only want to risk XX amount of money.

But if you don't put a stop in, you could end up suffering a huge loss. 

So tonight for example, if I wanted to get short and put a stop just above the highs of the last few days, up at 5.750 for instance. That makes sense because one might think that if the maps turned milder and the market cared.........we should keep going lower or sellers would step in aggressively before we got above the old highs........right?

This is what I would consider but it's ng. Larry will tell you this too.

We could have a model that suddenly looked much colder for a couple of days and see a massive spike to 5.8+, then the rest/end of the model came out milder and we crashed below $5.7 quickly.

This weeks highs are 5.799, so a stop above there would be another logical place if we got up to close to that and you wanted to risk a small amount selling.

So the shorts from before the model came out that sold around $5.705........where we are right now would have been stopped out for a $450 loss at $5.750.

When it was spiking to $5.8, they might be thinking.."whew, glad I got stopped out", then when we immediately spike below $5.7, they would be kicking themselves for having the stop in.

That example is the sort of thing that happens all the time overnight in natural gas.

Should you have not had the stop in?

What if the rest of the model came out cold?

Natural gas could be above $5.9 and you suddenly have a totally unacceptable loss of $2,000/contract.

I'm not a fan of setting a limit on how much to risk with a stop.........even though I do it sometimes.

Best to play the odds of risking ABOVE resistance on shorts and below support on longs and hope those sneaky SOB's don't go after stops or play surprise counter price spiking games.

Odds still favor you and this being the best way to play it.

Now that we've already dropped a bit,  shorts will be risking that much more than a short from just an hour ago but we could bounce back quickly.

The EIA report out later today at 9:30am is bound to be a big bearish one. Got any guesses?

Not sure if traders will sell off ahead of that one?

OK, we already bounced back from 5.662 to 5.698

The market is acting as if last weeks injection was an anomaly.  Personally, I only use mental stops.  Someone here, a long time ago, said that stops are just targets for traders to hit.  

The EE came out a whopping +5HDDs  while I was napping so we spiked higher immediately.

If I’d been up, it would have been a good buying opportunity.....but only for a very quick trade to play the markets knee jerk reaction..

It’s colder but really just LESS mild....not cold.

Now the market is trading the GFS which is coming out milder and pushed us back off the highs.

The 6z GFS Ens came out +2 HDDs more bullish  and we made new highs.

Thanks Mike!

I guess we have to ask ourselves, what would our prices be if Europe's weren't so high.  We would be at $6+?  Most likely, not.  

Today's EIA was as bullish (-16 vs WSJ survey mean) as last week's was bearish (+16 vs WSJ survey mean!

If you take 18bcf from last week, it gives you 100bcf, which is still bearish.  Then take that 18bcf and add it to this weeks 81bcf, you will have 99bcf.  Still bearish.  

Weekly Natural Gas Storage Report

 for week ending October 8, 2021   |  Released: October 14, 2021 at 10:30 a.m.   |  Next Release: October 21, 2021 

                                                                                                                                                                     Shockingly BULLISH! (vs expectations)                  +81 BCF                                                                                                                                                                                                                                

Summary

Working gas in storage was 3,369 Bcf as of Friday, October 8, 2021, according to EIA estimates. This represents  a net increase of 81 Bcf from the previous week. Stocks were 501 Bcf less than last year at this time and 174 Bcf below the five-year average of 3,543 Bcf. At 3,369 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. 

  https://www.investing.com/economic-calendar/natural-gas-storage-386

Low Wind Generation Drives EIA’s Shocking 81 Bcf Storage Build; Natural Gas Futures Surge

 After weeks of surprising to the upside, the Energy Information Administration (EIA) stunned the natural gas market on Thursday with a much lower-than-expected 81 Bcf injection into storage. Although there were concerns of a low-side storage build, the figure came in 3 Bcf below the lowest estimate ahead of the inventory report. The latest EIA… 

metmike: This explanation has me really awakened to what's coming up to massively complicate this market in the future WIND.

If a huge Arctic blast features high winds, those winds may offset some of the cold. Summer heat waves, will ALWAYS be low wind events, amplifying their demand power from ng to generate electricity.

I need to find a weekly wind data source ASAP! Larry, do you have anything right now?

I'm guessing that weekly sunshine is also going to provide an increasingly powerful affect down the road.....more sun during heat waves. Not as much affect during the Winter with a weak sun.

Times are changing.

I found a great source for the wind! https://weeklywind.com/

Oh, wait........they're talking about a different wind (-:

I give that a big maybe Mike.  Or it could be a convenient excuse for the discrepancy in reporting between 2 weeks.  For example, they didn't all of a sudden add 100 wind mills in Van Wert.  Those wind mills have been out there for years.  

How about this one?

https://weatherstreet.com/states/u-s-wind-forecast.htm

Jim,

Your missing their point. The amount of wind each week can change just like temperatures.

Widespread high winds over a 1 week can generate X amount of additional electricity compared to low winds over the same areas.

We need to calculate how much wind energy replaces how much natural gas demand.

It will be different for each state/region. The areas that have the highest winds and wind turbine farms will be in the north and Plains/West. Almost none in the Southeast. 

We need to calculate how much the total wind energy potential is and determine how much ng gas usage that replaces for instance.

Then work down/up from there and break it down into metrics that can be tracked which give us reliable estimates for +ng gas demand or -ng demand. 

This shouldn't be that difficult to figure it out but the tricky part will be predicting it with changeable weather and even more so............trying to determine the markets reaction.

We have HDD's and CDD's.

Some of these big firms must have programs that take the model data from each run and provide a total WIND output based on the wind turbine farms and wind amount...........and how that equates to HDD/CDD's.

NG was very strong ahead of this release. Could that have anything to do with it?

The guesses were way too high, so you would think not.

I get the point Mike.  But much like the windmills in Van Wert, we didn't all of a sudden get so many more that it has become an excuse for variations in NG usage.  While I agree it can have an impact, we are talking about almost 40 BCF difference between 2 similar weather weeks.  Did the wind make that much difference?  I doubt it.  Just a couple years ago we would have blamed the discrepancy on the EIA trying to even things out.  I could be wrong, but I am very skeptical.  

To your point though.  It might be easier to find out how much electric is generated from wind on a week to week basis.  

Thanks Jim!

I'm not making a case for something I don't have the accurate data to know about.

You have a gut feeling that could be right but also have no data to prove it. You might be right though. 

I'm making a case for obtaining that data so we WILL know and then appreciating that this is the direction we are going in with certainty and need to start dialing that into our understanding because lacking that, we are at a disadvantage to the market and traders that are dialing that into prices based on wind estimates.

We will be adding more and more wind turbines, so this will be more and more important.

Yes, to that I agree 100%.  

A source like this is a great starting point. I won't bog down this threat with a dozen graphics to provide the enlightening data like I prefer but will start a new thread on this later today and link to it. 

Today was sort of a wake up call for me on tracking this metric.

https://en.wikipedia.org/wiki/Wind_power_in_the_United_States

Wind power in the United States is a branch of the energy industry that has expanded quickly over the latest several years.^[1] From January through December 2020, 337.5 terawatt-hours were generated by wind power, or 8.42% of all generated electrical energy in the United States.^[2] In 2019, wind power surpassed hydroelectric power as the largest renewable energy source generated in the U.S.

I will not that last weeks unusually mild temperatures were caused by a pattern that featured LOW winds:

https://www.marketforum.com/forum/topic/75979/#76088

I have no clue on what that means as far as relatable metrics to electricity generation but it was a low wind pattern.

12z GFS was an incredible -8 HDDs less than the previous run!

The last 12z GFS was a whopping -8 HDD's cooler!

And NG is falling out of bed.  We will see $4 before we see $7

https://www.cpc.ncep.noaa.gov/products/precip/CWlink/pna/nao.shtml

https://www.cpc.ncep.noaa.gov/products/precip/CWlink/pna/pna.shtml

The models are having huge shifts in HDD's from run to run because of the handling of a big upper level low in Southeast Canada associated with a strongly negative --NAO.

In addition, a strongly positive +PNA

This encourages air masses in the West and in Southern Canada to move from north to south into the US. How much cold there will be from the source region(that could be fairly mild) and how amplified the pattern will be has been changing drastically each run

Looks like the Euro is going to come in around -7 HDD's too. 

It finished and the 12z run was actually -8 HDD's vs the previous 0z run!

The changes never represented a pattern change to colder but, instead just how much cold was going to surge south in week 2 with a temporary break in the mild pattern............that will resume right after it.

Hints of Cooler Weather, Tight EIA Storage Stat Spook Natural Gas Futures; Cash Rallies

metmike: I'm sure that you'll agree that the headline above is extremely misleading. The market collapsed after the spike higher after the EIA report with late am/early pm weather models showing a massive BEARISH drop in HDD's even as they are still focusing on the news about the colder runs from 12 hours earlier. They are basically reporting the news from overnight and ignoring the much more important weather news that totally dominated the trade for the last 4 hours of trading today.

I would agree on two things. 1. The spike was based on the bullish injection report, and the remaining sentiment on the European gas shortage. And 2. The realization that the European gas shortage is basically over.  

Already, the daily chart is putting in a top. Not strictly an H&S formation. But enough weakness to cause me to be looking to short the market in the next few days. Weather will start coming into play more, once this short side starts. Are you ready for a roller coaster ride?

Euro a whopping +8 HDDs.

GFS is warmer so down we go.

Natural Gas Futures Give Back Gains as Wind Gen Said Returning to Drive Up Injection Rate

 As the natural gas market continued to mull the implications of a lower-than-expected weekly storage build, one that appeared to derive from a temporary drop in renewable generation, futures prices retreated in early trading Friday. After rallying 9.7 cents in the previous session, the November Nymex contract was down 10.4 cents to $5.583/MMBtu at around… 

metmike: As mentioned yesterday. We need to get a handle on this if the market is trading it.

12z EE was -3 HDD's...........milder. With the 12z GFS the same from 0z run but slightly colder +2 HDD's vs the 6z run.

HDD's will be going up seasonally. The comparisons above are for the same 1-14 day periods. The more recent runs, don't use the last day that goes out farther than the earlier ones.

Seasonal HDD's are going up at a very steep rate now. Going from just under                   6 HDD's/day right now to just under 9 HDD's/day in  15 days.

This is what the graph of the last 4 runs of the GFS Ensemble showed:

Big gap lower this evening from a very mild weather outlook.

Bearish downside breakaway gap unless it gets filled, which would serve as a potential gap and crap technical signature.

However, this is extremely interesting because the last 12z GFS was a whopping +10 HDD's and +7 HDD's vs the 0z run, which is BULLISH and the European model was +8 HDD's for the same run vs the previous one.

This is really just a less mild forecast overall and not a pattern change but more of how much cold comes with the cold front in the middle of the period....which means the forecast is still pretty bearish overall and that last run was just NOT AS bearish. 

Natural Gas Futures Called Lower After Weekend Weather Model Volatility

 As traders weighed a bearish weather outlook domestically against new developments on the overseas supply crunch, natural gas futures fell sharply in early trading Monday. The November Nymex contract was down 24.0 cents to $5.170/MMBtu at around 8:45 a.m. ET. The major weather models experienced some volatility over the weekend, according to Bespoke Weather Services.… 

metmike: Spiked down and up a few times overnight but we still have the downside gap from Friday's low between  5.40 to the very early morning high of 5.37.

This is a downside breakaway gap lower signature,technically significant....ordinarily but the way that ng has been trading the last month, I won't put tremendous weighting on it, though it is significant.

Last weeks low was 5.168 and we are trading just above that after dropping below it last night at 5.099.

The weather models turned MORE bearish again overnight.

Natural Gas Futures Slip as Coming Cool Front Only ‘Window of Variability,’ Not True Cold

Natural gas futures closed the week lower as the latest storage data — the tightest all summer — was seen as a one-off event amid an otherwise bearish backdrop. With the coming two weeks likely to include only a few days of cool weather, the November Nymex gas futures contract fell 27.7 cents on Friday… 

metmike: Agree strongly with that explanation.

Latest Weather: https://www.marketforum.com/forum/topic/75004/