NatGasWeather.com Daily Report

Transcription

1 NatGasWeather.com Daily Report Issue Time: 5:15 am EDT Wednesday, March 22 nd, Day Weather Summary (Mar th ): A cold blast will sweep across the Great Lakes and eastern US today and Thursday with a surge in nat gas demand as overnight lows again drop into the lower 20s to near 0 F. Over the central and southern US, strong high pressure continues to dominate with highs of 60s to 80s, locally 90s. The West will be mostly mild, although with areas of showers. Warm to mild conditions will dominate most of the US this weekend, even as a springlike weather system with heavy showers and thunderstorms impacts the central US. Next week will be mostly mild to warm across the country with limited demand for heating or cooling besides the far northern US Day Outlook (March 28 April 4 th ): Weather systems are expected to track across the western and central US with rain and snow, averaging out near to slightly cooler than normal. Over the southern and eastern US, stronger than normal high pressure will result in slightly warmer than normal conditions. Summary: Slightly Cool West & Central. Warmer Than Southern & Eastern US. Nat Gas Demand Next 15 Days: HIGH Days 1-2. LOW-MODERATE Day 3-15 Weather Market Threat: LOW Nat Gas Flux Index: -17 (Bullish) Weather Discussion & Market Effect: April 17 nat gas futures closed around 5 higher Tuesday in rather choppy trade, but still remaining solidly above $3. Slight changes in recent suites of weather data, this time to the slightly cooler side, although it s important to note there are decent weather model differences, especially in regards to how weather systems impact the central US late next week through early April. Overall, we view the weather data as adding just a couple HDD s over the past 24-hours, but still a relatively seasonal pattern overall with springlike weather systems bringing heavy showers and thunderstorms, just with limited amounts of cold air. In between spring weather systems, conditions will be mild to warm with highs mainly in the 50s to 80s. Until then, there s still the current strong cold blast impacting the upper Midwest and Northeast where overnight lows will drop well below freezing the next few nights to drive stronger than normal nat gas demand. The southern US remains quite warm, as highs reach the 80s to locally lower 90s, requiring light early season demand for cooling. As the eastern US moderates late this week with temperatures warming into the upper 50s to 70s, national nat gas demand will ease below normal. This coming weekend, a weather system will track out of the West and across the central US with a round of strong spring thunderstorms, but with limited cold air associated with it. Next week will be quite springlike with temperatures F warmer than normal besides the West for light national demand. Weather systems are then expected to arrive late next week through early April over the central and northern US, which is where the weather data trended slightly cooler. Overall, weather patterns are expected to become quite seasonal from late this week and beyond as mild to warm breaks set up in between slightly cool weather systems. To our view, bulls remain in control as long as $3 holds, although price have recently become choppy, potentially waiting on Thursday's EIA storage report. We view $3 and $3.12 as important areas of support and resistance. Simply put, a rather seasonal pattern is expected for late March and early April, although has trended a touch cooler over the past 24-hours to add just a couple HDD s. Although, do expect minor changes to upcoming forecasts due to weather model differences. We view price gains this week being driven by daily production dropping back below 71 Bcf/d, strong nuke plant maintenance, strong LNG and Mexico exports, as well as expectations for a hefty draw Thursday. Bigger picture, we continue to see the coming pattern resulting in near to slightly stronger than normal demand vs the 5-year average, further reducing surpluses, just at a gradual pace.

2 Selected Weather Images - Wednesday: Cold Blast NE US, Warm S, Wet W Day: Warm vs Normal Shifts East, Cool West. Cold Blast NE US Wed-Thu. Mild/Warm Rest US Mild/Warm US This Weekend. Spring Storm C US. Mild/Warm Over Much of US Next Week. Only Slightly Cool Far N US, Slightly Hot Far S. Pattern March 30-Apr 3 rd Brings Seasonal Wx Systems, But Cold Air Locked Over Canada. Nat Gas Commentary by Prof of Finance Andrea P: Natural gas prices increased yesterday with April'17 up 5 to settle at $ The entire forward curve was up with the front outperforming the back after again bullish S/D balance data countered bearish weather. The fact the May'17 and all the summer'17 strip outperformed April'17 contract is an important indicator of the natural gas balance. While the next 15 days will bring us a very low amount of HDD s, we had US lower 48 production barely above 70 bcf, at 70.2 bcf, yesterday, lower week on week. We also had a near record high Mexico exports at 4.1 bcf, and power burns at 22 bcf, a pretty good value weather adjusted. I see this posing an upward risk to natural gas prices during the shoulder season if we are not able to get a recovery in production.

3 EIA Weekly Nat Gas Storage Report Outlook Table: EIA Weekly Report Week 1 March 23 rd (March th ) Week 2 March 30 th (March rd ) Week 3 April 6 th (March th ) NatGasWeather.com Forecast -147 to -157 Bcf -45 to -60 Bcf -2 to -17 Bcf 5-Year Average -21 Bcf -27 Bcf -13 Bcf Compared to 5-Year Ave Much Larger Than Normal Draw Larger Than Normal Draw Near Normal Draw Recent Trend MUCH Larger Draw No Trend Smaller Draw BULLISH (cold) NEUTRAL (warm) BEARISH Notes: Last week s EIA storage report showed a draw on supplies of -53 Bcf, slightly bearish to market expectations around -56 Bcf, while we were spot on. This week s draw will be factoring in much colder temperatures, resulting in a draw more than 120 Bcf larger than the 5-year average. This will drop surpluses in supplies from +395 Bcf to around Bcf. Monthly Temperature Anomalies March 1-18 th Temperatures vs Normal Forecast: 15 CDD+645 HDD 30-yr Ave: Total CDD/HDD vs Normal %

4 Temperature (HDD & CDD) vs Normal Forecasts Next 3 Months April May June Forecast: 35 CDD+233 HDD yr Ave: Total CDD/HDD vs Normal +4% Forecast: 137 CDD HDD yr Ave: Total CDD/HDD vs Normal +1% Forecast: 263 CDD + 25 HDD yr Ave: 232 CDD + 33 HDD 265 Total CDD/HDD vs Normal +5% Observed Previous 3-Month Temperature vs Normal December January February Total 873 HDD & 13 CDD yr Ave ( ) 896 Nat Gas HDD/CDD vs Normal -1% Total 856 HDD & 7 CDD yr Ave ( ) 974 Nat Gas HDD/CDD vs Normal -11% Total 609 HDD & 10 CDD yr Ave ( ) 794 Nat Gas HDD/CDD vs Normal -22%

5 End of Withdraw Season Supplies (April 5 th ): 2016/17 (NatGasWeather.com Forecast) 2015/16 (Warm Last Winter) 2013/14 (Cold Winter) 5-Year Average Forecast 2016/17 HDD Totals: October 1 st April 15 th (Heating Season) December -February (Winter Season) 1,995 Bcf 2,468 Bcf 827 Bcf 1,606 Bcf 3,825 vs 4, Year Ave 2,319 vs 2, Year Ave

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7 Current Nat Gas Flux Index: -17 Nat Gas Flux Strategies (requires numerous consecutive weeks): Nat Gas Flux -10 to -40: Bullish - Buy Moderate to Strong Sell-offs Nat Gas Flux -9 to +9: Neutral - Expect Choppy Trade or Potential Price Reversal Nat Gas Flux +10 to +40: Bearish - Sell Moderate Price Rallies We developed the Nat Gas Flux Index to evaluate price movements in the natural gas markets based on changes in supply/demand dynamics. Below is a description of our proprietary Nat Gas Flux Index and how to interpret it based on the current market situation. How to read the Nat Gas Flux: Blue Nat Gas Flux weekly bars above zero (black line) indicate structural loosening, which our research has shown to historically pressure prices. When the Nat Gas Flux weekly blue bars are below zero, prices often find support. The orange line represents the price of the front month nat gas futures contract. You will clearly see when blue bars are above zero, such as during 2014 and 2015, prices were pressured and steadily fell. You will note a short-term rally in prices occurred during Dec 2015, which was based on a couple strong polar outbreaks that intimidated the market, but once they passed, prices sold back off as Nat Gas Flux remained above zero. A reversal in price occurred in March/April 2016 just as Nat Gas Flux flipped below zero, where it has remained through summer. The updated index for March 17 th has it remaining well below zero at -17 (furthest right blue bar on image). That s not to say, there can t or won t be periods where prices sell-off for weeks at a time when the flux is below 0, especially after strong rallies or during mild winter temperatures, much like what occurred several times this winter. It should be considered a weekly index, not daily, and will be updated on Friday's. All forecasts and content within natgasweather.com reports are use at your own risk. Users assume all liabilities. Content is not an endorsement to buy or sell stocks, options, futures, ETF's, or any financial instrument.