Traders and hedgers are likely looking ahead to winter and at storage build. After this week’s report (there was some high cooling demand last week), cooling demand is likely over – it doesn’t look like and Indian summer will occur in 2015. This should and will cause some very large builds heading into winter.
El Nino has acted as a shield in the Gulf– deterring the Atlantic cyclones from the African coast to either die an early death, or throwing them back out into the northern Atlantic. And while gulf production is essentially meaningless these days (~7% of production), a good ole fashioned scare rally could have gotten the bulls above the $3.10 level and on to a new and higher trading range – this is the first summer I can remember without at least one spike in prices for either power or natural gas. Hence the repetitive market updates.
El Nino is also likely going to cause a very mild winter for the traditional heating demand regions of the US – therefore if underground storage is at or close to record levels when withdrawal season begins, levels will start the injection season at very high levels historically. This should drive the front of the curve down a good bit – perhaps even testing the 2012 low of $1.92.
That is if everything goes according to plan
Keep in mind that the back end of the curve is not likely to tumble even if the front end does so – there is far too much bullish news for natural gas down the road beginning with Chenier beginning to export 1 BCF/day this winter or first quarter of 2016. That coupled with the historic low rig counts would tell me to take advantage of this opportunity. There is at least a six mointh lag to get wells going again and there is bound to be a significant drop in production at some point, right??????
MACD started to point bullish last week - but still looks like it will remain sideways. That is about the only bullish sign we have had out of the prompt chart in a while. It looked like there was a breakout of the consolidation pattern to the upside Monday – however, the rally stalled at the fibinacci 38% retracement - Tuesday and today are showing that was a false breakout – a very bearish signal. And a very similar move to the last break out to the downside back in august (shown by arrows).
Likely that natty will head lower as we head into OCT – but still in a very narrow trading range of ~ 2.60-2.75. the uptrend was broken and likely a breakout of this consolidation formation will also be to the downside. – I look for the YTD low of $2.44 to be tested.
One thing I am watching is for the 50 and 100 day moving averages to cross the 200 day moving average (red) forming a “golden cross” - which can be a signal of a market reversal. I don’t see how that would happen, but I am strictly speaking technical analysis.
Natural Gas Inventories currently stand at 3,261 BCF
Don’t Let The Knee-Jerk Reaction By The Jerks On The NYMEX Spook You. Last Week’s Report Was Bearish
Last week the EIA reported a large addition of natural gas. Yes, just because the Crowd muffed the forecast, does not take away from the fact that yesterday's report was large. For the week ended September 04, a total of 68 BCF was added to the ground. 63 is the five year average.
Total inventories in the lower 48 states climbed to3.26 Tcf. The surplus to a year ago fell to 16%, but the disposition to the 2009-2013 average switched from a 3 Bcf deficit, to an 8 Bcf surplus. Recall, at the end of last winter the deficit to this timestep was 20% or 354 Bcf.
Up through last week, additions are averaging 11.2 Bcf/d, or 1.21× the five-year average. As a result, a very large 1.80 Tcf of gas has been restocked thus far, the fourth largest on record
Last week – cooling demand was pretty firm – but the warm weather disappears this week and likely some very large builds are coming.
Tomorrows Estimates are in the Low to mid 70’s – the five year average is 75
First named storm coming off coast of Africa
The 6-10 day forecast is for warmer than normal temps across the US. However “warmer than normal” does NOT equate to CDD’s given that Houston is looking at low 80’s and the Midwest and Northeast are looking at temps in the 60’s/70’s – note the heat index outlook showing low temps.
It looks like we are past the cooling demand and will start to look at the winter ahead – which El Nino may have a major impact.
There is an approximately 95% chance that El Niño will continue through Northern Hemisphere winter 2015-16, gradually weakening through spring 2016.
What does this mean ----- likely a very mild winter – argot a lower than normal draw on natural gas storage. The lower 48 should see cooler and wetter than normal weather and the northern latitudes would be warmer and dryer. Essentially the opposite affect from the polar vortex.
In addition – after the 4 year drought in place on the west coast – record amounts of rain could hit the dried out region. While the region does need rain – this can also cause major mudslides and flash flooding