BESPOKEWeather Services Weekly Natural Gas Report

Transcription

1 bcf Weekly Natural Gas Report Click to View Section OVERALL SENTIMENT STORAGE DYNAMICS CURRENT WEATHER EXPECTED WEATHER TRENDS SEASONAL WEATHER TRENDS MARKET TECHNICALS Natural Gas Futures Strip REPORT DASHBOARD Forecast Confidence: 5/10 Current Deficit/Surplus to 5-Year Storage Average: -346 bcf Today s Most Recent Prompt Month Price: Report Summary: The natural gas strip is under significant pressure today as weekend weather trends were not particularly supportive and last week s EIA print continued to show a loosening market. We see short-term weather as still quite supportive, and there are increasing risks for colder trends and more lingering heating demand through mid-april. However, as we move through April we are increasingly skeptical that weather will play a major role in price action, especially with production at record levels and the entire strip being hit hard today. The result is sentiment that is neutral despite weather we continue to see as bullish, as prices may be range-bound or even have a bit of a lower bias until we see further signs of market tightening. $2.75 likely remains as very firm resistance. Weekly Change In Natural Gas Inventories Most Recent Settle Month Ago 3 Months Ago 6 Months Ago 1 Year Ago 2 Years Ago -260 For Personal Use Only Forwarding Or Distribution Not Permitted Year Average 2017 Average Since /1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/1 10/1 11/1 12/1 TABLE OF CONTENTS

2 Overall Sentiment: SLIGHTLY BEARISH Sentiment Summary: Our weekly natural gas sentiment sits at slightly bearish as we see more risk to the downside for prices moving forward. A weak forward strip reflects concerns about how quickly production levels have grown, with the market rapidly loosening. Though our current weather forecasts are quite bullish, and they are unlikely to warm much through the week, we are skeptical April heating demand additions can stabilize a market dealing with record production. Storage Dynamics Current Weather Weather Trends Seasonal Trends Market Technicals EIA data last week was a bit less conventional as a reclassification led to a larger net change than many expected, but a limited withdrawal was looser than expected and continued to confirm that the natural gas market is quite loose overall. We see that continuing with the upcoming EIA print as well, as we are looking for a slightly smaller withdrawal despite a few more GWDDs on the week. Increasing nuclear outages may allow for gradual tightening from here through the following weeks, and storage levels remain very low, but with the market this loose it is hard for prices to rally much even with storage. Wk End EIA Forecast 6-Apr Apr Apr Apr 62 *BWS Forecast Current weather forecasts are extraordinarily bullish for natural gas prices as we look to see heating demand far above seasonal averages into the final third of April. Some short-term warming have kept 6-10 Day forecasts from being quite as impressive, but the 8-14 Day forecast beats our already bullish expectations from last Friday. We had expected if anything we would add a few GWDDs over the weekend, which is exactly what happens as very bullish weather will do all that it can to stabilize a natural gas market that otherwise is dealing with broad oversupply. GWDDs Current Monday Expected 6-10 Day Forecast Day Forecast Forecasts are quite supportive over the next couple of weeks, and we see lingering cold risks through the end of April with upper level blocking preventing any major warmth across the Midwest and Northeast. Models have been consistently trending stronger with these blocking events that should cancel out what appears to be an unfavorable Pacific for sustained major shots of cold. In the longrange we would look for warmth to dominate the last few days of April into May as the upper level blocking regime breaks down, but a couple more cold shots before then remain likely. 2 For Personal Use Only Forwarding Or Distribution Not Permitted GWDDs Today's 15-Day to Avg 47.2 Friday's 15-Day to Avg 40.2 Change 7.0 Forecasts have only continued to trend colder through April, and though we may gradually warm through the final third of the month upper level blocking should keep heating demand from consistently falling below average. May does not look particularly inspiring for weather-driven demand, though the South could see some decent heat. However, a rapid breakdown in Nina conditions could portend colder revisions to the forecast later in the summer if we begin to transition into a warmer ENO base state April GWDDs Old Forecast New Forecast 5-yr 10-yr Climo Natural gas prices are once again selling off today, but this time selling is strongest along the summer strip, with significant weakness out into the winter contracts. Weather and stronger cash prices are propping up the prompt month May contract, but this bearish move along the strip indicates that lower support down around $2.6-$2.62 will likely need to be tested after the heavy selling today, and that price risk through the risk is skewed much more to the downside than upside. Change In Natural Gas Contract Value Daily Change Weekly Change Monthly Change K8 M8 N8 Q8 U8 V8 X8 Z8 F9 G9

3 Weekly Storage Change Weekly Storage Change (bcf) Storage Dynamics: NEUTRAL Section Summary: Heating demand this past week was again above average, with early-season cooling demand ticking up as well. However, production growth appears to mute the impact of this tick higher in weather-driven demand, as we are looking for a withdrawal that does not reflect any significant market tightness on a historical basis. Shoulder season data is notoriously volatile, but our modeling is struggling with this upcoming print due to how much looser we expect it to be. Raw TDD Model Average Adjusted TDD Model Bespoke Weather Services Official Forecasts Wk End Estimate 6-Apr Apr Apr Apr Weekly GWDDs Wk End Estimate 6-Apr Apr Apr Apr 44.0 Average Apr 13-Apr 20-Apr 27-Apr Storage Change (bcf) yr Storage Change (bcf) Forecast/Observed TDDs yr Avg TDDs Climo Next Slide 4-Week Total Forecast (bcf) 4-Week Total 5-Year Average (bcf) 4-Week Stockpile Forecast (bcf) 4-Week 5-Year Stockpile Average (bcf) Gas Week 13 Since Last 10 Gas Weeks This Week (estimated) Gas Week 1 Gas Week 11* Gas Week 21 Gas Week 31 Gas Week 41 Gas Week Weekly GWDDs 3 For Personal Use Only Forwarding Or Distribution Not Permitted 2018 (estimated) Weekly GWDDs

4 bcf Storage Dynamics: NEUTRAL Key Takeaway: Weather last week was supportive for the natural gas market, though short-term warming trends kept the week from being quite as bullish as had previously been expected. Regardless, significant cold across the Great Plains and lingering cold across the East Coast allowed for GWDDs that were decently above average. Still, production that is far above year ago levels and has only continued to grow the last few weeks will keep this week s EIA print from appearing tight. Discussion Last week s EIA print once again missed on the looser side of estimates as the natural gas market continues to contend with production at record levels. It remains quite likely that this upcoming print is similarly loose, as we see dry production ticking higher last week again. This comes as higher cash prices limited power burns, with cash running up as high as $2.8 through the week. Demand overall was still impressive thanks to significant cold focused across the Midwest and Great Plains, which resulted in GWDDs that were very significantly above average. The EIA will accordingly still announce a draw from storage, and this will only further limit stockpiles from the 5-year average. However, much of this is priced in, and the draw will be significantly smaller than it would have been a few months ago when the market was noticeably tighter. Accordingly, though we see the print on Thursday as being quite bullish to the 5-year average (as will the ensuing print), recent market loosening has limited the impact of lower storage levels and added to the sense of complacency that storage will easily be filled through the injection season, keeping the impact neutral overall. GWDDs 3/31 4/1 4/2 4/3 4/4 4/5 4/6 Total Climo Avg New England Mid Atlantic East North Central West North Central South Atlantic East South Central West South Central Mountain Pacific Continental US For Personal Use Only Forwarding Or Distribution Not Permitted Natural Gas Regional Storange Difference to 5- Year Average -100 Lower South Central Mountain Salt - East Pacific -400 Midwest Nonsalt /14 5/14 6/14 7/14 8/14 9/14 10/14 11/14 12/14 1/14 2/14 3/14

5 billion cubic feet (bcf) billion cubic feet (bcf) billion cubic feet (bcf) billion cubic feet (bcf) Storage Dynamics: NEUTRAL Key Takeaway: Stockpiles across the East fell in line with year ago levels last week, and we would expect them to continue falling the next few weeks with cold weather though they will easily remain above the 5-year minimum. Elsewhere we could see Midwest stockpiles further depleted by cold through April across the Great Plains and Midwest, though they are still far above the 5-year minimum as well with the Mountain region eyed most closely with depleted stockpiles Past Year of Natural Gas Stockpiles East Region 1100 Past Year of Natural Gas Stockpiles Midwest Region This Year 5-Year Average 5-Year Maximum 5-Year Minimum 200 Last Year 100 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/ This Year 5-Year Average 5-Year Maximum 5-Year Minimum Last Year 100 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/28 Past Year of Natural Gas Stockpiles Mountain Region 400 Past Year of Natural Gas Stockpiles Pacific Region This Year 5-Year Average This Year 5-Year Average Year Maximum 5-Year Minimum Year Maximum 5-Year Minimum Last Year Last Year /31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/28 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/28 5 For Personal Use Only Forwarding Or Distribution Not Permitted

6 billion cubic feet (bcf) billion cubic feet (bcf) billion cubic feet (bcf) billion cubic feet (bcf) Storage Dynamics: NEUTRAL Key Takeaway: Stockpiles across the South Central have stabilized as cold has been focused primarily across the northern tier the last couple of weeks. This trend should continue over the coming few weeks, with maybe one cold shot getting into the South but otherwise temperatures being around to a bit above average. Salt stockpiles near average bodes well for what should be a warm late April and May, as we then should pull a decent amount of gas with summer cooling demand too Past Year of Natural Gas Stockpiles South Central Region Past Year of Natural Gas Stockpiles Salt Region 700 This Year 5-Year Average Year Maximum 5-Year Minimum Last Year 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/ Past Year of Natural Gas Stockpiles NonSalt Region This Year 5-Year Average Year Maximum 5-Year Minimum Last Year 50 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/ Past Year of Natural Gas Stockpiles Lower This Year 5-Year Average Year Maximum 5-Year Minimum This Year 5-Year Average Last Year Year Maximum 5-Year Minimum 200 Last Year 500 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/28 3/31 4/30 5/31 6/30 7/31 8/31 9/30 10/31 11/30 12/31 1/31 2/28 6 For Personal Use Only Forwarding Or Distribution Not Permitted

7 New England Mid Atlantic E N Central W N Central S Atlantic E S Central W S Central Mountain Pacific Cont. US Current Weather: MODERATELY BULLISH Section Summary: GWDD forecasts continue to remain incredibly impressive, even as we see short-term warm trends arrive today in NWS forecasts. GWDDs over 20% above average are expected over the next 15 days, with another very strong cold shot currently forecast on the 15 th and 16 th. Beyond that we should see heating demand gradually fall back off, but it should remain above average into the final third of the month as blocking traps cold across the Midwest into the Northeast. Historic GWDDs Bespoke Gas Weighted Degree Day (GWDD) Forecasts GWDDs 4/9 4/10 4/11 4/12 4/13 4/14 4/15 4/16 4/17 4/18 4/19 4/20 4/21 4/22 4/23 Total BWS Forecast Old Forecast yr Avg Avg For Personal Use Only Forwarding Or Distribution Not Permitted Next Slide 4/9 4/10 4/11 4/12 4/13 4/14 4/15 4/16 4/17 4/18 4/19 4/20 4/21 4/ AVG

8 BESPOKE Weather Services Current Weather: MODERATELY BULLISH Key Takeaway: The current pattern continues to have a very significant amount of cold risk, with recent GEFS guidance showing sustained cold from the mediumrange into the long-range. Heating demand should be far above average for the month of April and will only very gradually fall off into the final third of the month. GEFS D8-14 Temp Anom Odds 0z GEPS D14 0z GEFS D14 Discussion 8-14 Day CPC 6z GEFS D Day CPC 6z GEFS D8-14 0z GEFS D10 0z GEPS D10 CMC NAEFS Odds D Day Analog 0z ECMWF D8-10 0z GFS D8-10 0z CMC D8-10 D11 GEFS Analog Above images courtesy of Penn State Electronic Wall Map Site Above images courtesy of the Climate Prediction Center For Personal Use Only Forwarding Or Distribution Not Permitted Natural gas prices are being hit hard today, but it is clearly not weather with very impressive heating demand expected over the next couple of weeks. Despite all the selling along the strip K/M is still increasing by 4-5 cents on the day, a testament to how strong the April weather signal is. Over the weekend we did see some short-term warming trends which should allow for cash weakness across the country this month as heating demand temporarily falls back below average. However, another strong cold shot on the 15th and 16th focused across the Great Plains and Midwest will quickly pull heating demand back far above average, with a couple models now showing potential heating demand records. Granted, coming in the middle portion of April it is difficult for this to have all that significant an impact on natural gas demand overall, especially with it being a shortterm demand increase trying to balance out sustained impressive production increases. However, we are looking at relatively close to maximum bullishness for forecasts in the medium-range with lingering cold into the longrange and the short-term being the only thing keeping us from listing weather as very bullish. Most models now show heating demand remaining above average through at least the 23rd thanks to favorable upper level blocking with risks that cold lingers even longer.

9 Weather Trends: SLIGHTLY BULLISH Next Slide Section Summary: Models continue to show a pattern through the end of April that will have significant cold risks across the northern half of the country. This comes as upper level blocking across northern Canada and Greenland trended stronger on model guidance over the weekend, with long-range biases negative in both the NAO and AO. Coupled with a decaying MJO before warm phases are reached this should keep at least modestly cooler cold risks in the forecast the next few weeks. AO Forecasts PNA Forecasts NAO Forecasts Pacific SST Anomalies GFS Blocking Forecasts April Phase 1 ECMWF MJO GEFS MJO BOM MJO SOI Index (BOM) CIPS D12-14 CFSv2 ENSO Forecast Above images courtesy of the Climate Prediction Center 9 For Personal Use Only Forwarding Or Distribution Not Permitted

10 Weather Trends: SLIGHTLY BULLISH Key Takeaway: CPC forecasts favor warmth across the southern tier through the long-range, which matches with many of our long-range expectations. There are risks that into early May the forecast warms across the country as the source region for cold eases, but the long-range blocking signal shows only limited warmer risks. CPC 3-4 Week CPC Monthly 0z GEPS D15 GEFS D10 534/576dm Spaghetti 6z GEFS D15 AAM/GWO Organic Methods ONI Observations EPO Forecasts Stratosphere Weekly Models GEFS D14 534/576dm Spaghetti Other Forecast Contributors Above images courtesy of the Climate Prediction Center 10 For Personal Use Only Forwarding Or Distribution Not Permitted Discussion Recent model trends towards increased upper level blocking across northern Canada and Greenland will keep stale cold air trapped across the northern tier into the end of April, as a decaying La Nina is unlikely to bring significant warmth through the next few weeks. We had been watching for warmth into late April and early May as the Pacific becomes far less favorable for significant cold, but these upper level blocking developments should prevent any significant warming from occurring. Moving into May we tend to transition from seeing heating demand matter most to seeing cooling demand matter most, but early in the month cold tends to on balance impact the market a bit more, meaning that we could still see some of these colder trends as temporarily supportive. However, once this upper level blocking breaks down we would expect further moderation across the country that would result in more seasonable weather that would struggle to bring significant heating or cooling demand, allowing injection size to swell. This may wait until early May, though, as before then we see risks that forecasts still trend a bit colder, as we have seen with a shorterterm cold shot now on the 15 th and 16 th. The result is an expectation that weather trends through the week are still rather bullish, though of course the relative impact of these trends in April for the natural gas market are still limited by what are much smaller incremental demand increases.

11 Seasonal Trends: NEUTRAL 11 For Personal Use Only Forwarding Or Distribution Not Permitted Section Summary: La Nina conditions are breaking down across the Pacific with ENSO neutral conditions by late spring into early summer increasingly likely. Depending on the speed of this transition we could see temperatures through the summer limited, especially if we see warm ENSO neutral conditions by later in the summer. While in the next few weeks the bias is colder, we still do expect periods of warmth in May into June, with uncertainty still quite elevated beyond there. Global Sea Surface Temperature Anom Pacific SSTs Stratospheric Temperatures Discussion Quasi-Biennial Oscillation (QBO) Pacific Decadal Oscillation Atlantic Meridional Mode Above images courtesy of NOAA Next Slide Weak La Nina conditions across the Pacific as more rapidly being replaced as the entire Pacific warms. Just north of the equator we now see significant warmth, while the western Pacific is seeing broad warming that should move east through the next couple of months. We would accordingly expect any lingering Nina-like conditions to degrade and we could transition to ENSO neutral conditions (at first cold biased but then potentially warm bias) as we move through the summer. A number of models show an El Nino forming by late summer or early fall, too, but it remains quite volatile. In general, the Pacific has only a limited impact over the next few weeks when we see upper level blocking across northern Canada and the northern Atlantic preventing any significant warming across the country. As that blocking breaks down through May we would expect a less favorable Pacific for cold to allow for more warmth, and overall we struggle to see weather-driven demand being all that impressive through May. Assuming there is not an extremely rapid warming across the entire central Pacific we would still expect the bias to be warmer through the month of June, which would be quite bullish for a natural gas market that has very limited gas in storage. However, confidence in that heat lingering through the summer is falling as we may transition into a warmer ENSO base state by the end of the summer, leading to a continuation of our neutral seasonal outlook for natural gas.

12 Market Technicals (Price): SLIGHTLY BEARISH Section Summary: May natural gas prices are selling off back to the bottom of the more recent range. Weakness along the strip seems to point to support being tested around the $2.6-$2.62 level. This support is quite firm, though if it were to break we would look for prices to quickly fall towards the $2.52-$2.54 final support level for the contract. Prices in the short-term should not deviate too much from this range as the future strip shows a tight bundling with prices near fair value. 6-Month May Contract Natural Gas 30-DMA 60-DMA Natural Gas Calendar Prices /4 11/2 12/4 1/4 2/5 3/7 4/6 12 For Personal Use Only Forwarding Or Distribution Not Permitted /4/ /2/ /4/2017 1/4/2018 2/5/2018 3/7/2018 Cal 18 Cal 19 Cal 20 Cal 21 Cal 22 Cal 23 Average Prompt Month Natural Gas Daily Trading Range /4 11/4 12/4 1/4 2/4 3/4 4/4 10-Day 30-Day 5-Day 85% 75% 65% 55% 45% 35% 25% 4/6/2018 Natural Gas Prompt Month Annualized Volatility 10-Day Vol 30-Day Vol % 10/4 11/4 12/4 1/4 2/4 3/4 4/4

13 13 For Personal Use Only Forwarding Or Distribution Not Permitted Market Technicals (Spreads): VERY BEARISH Next Slide Key Takeaway: K/M is making short-term highs even as the entire natural gas strip is selling off, a very bearish indication that the market is reacting to looser balances and shorter-term weather or cash-driven catalysts are unlikely to rally the market back. V/F is falling back a bit on this selling, setting a new short-term low which is not as bearish as the K/M move (with later contracts again seemingly bid up mid-day), but weakness along the front of the strip shows very limited upside short-term. 3.7 Prompt Month Natural Gas and V7/F Prompt Month Natural Gas and K8/M /4/ /2/ /4/2017 1/4/2018 2/5/2018 3/7/2018 4/6/ /4/ /2/ /4/2017 1/4/2018 2/5/2018 3/7/2018 4/6/2018

14 14 For Personal Use Only Forwarding Or Distribution Not Permitted Market Technicals (Positioning): SLIGHTLY BEARISH Key Takeaway: Money managers last week closed a small number of long positions and opened a few short positions, though positioning was minimal. The market continues to be quite long given where prices are, with more risk for longs abandoning ship or shorts adding on positions as opposed to the other way around. Money managers seem to have some ammunition for either direction with a major fundamental change, but they remain solidly net long despite early 2018 declines. 80% 60% 40% 20% 0% Money Manager Percent of Open Interest 45% 40% 35% 30% 25% 20% 15% Percent of Open Interest Long Short Spreads Total End Users Swap Dealers 15% Net Percent of Open Interest 30% Net Percent of Open Interest 10% 20% 5% 10% 0% 0% -5% -10% -10% -20% -15% -30% Other Reportable Positions Non-Reportable Positions Money Managers End Users Swap Dealers

15 Market Technicals (Other): NEUTRAL Key Takeaway: Seasonality overall in April is quite bullish, especially mid-month. This is temporarily canceled out by what we see as very bearish cash action, with elevated Henry Hub cash prices unable to sponsor much of a sustained rally at all with prompt month futures. Once cash prices pull back, further downside arises. 7.0 Natural Gas Seasonality Prompt Natural Gas vs. Henry Hub Cash Jan 1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct 1-Nov 1-Dec 10-Year 20-Year 5-Year 2018 Natural Gas vs. WTI Crude WTI NG /11/2017 6/11/2017 8/11/ /11/ /11/2017 2/11/2018 4/6/2017 6/6/2017 8/6/ /6/ /6/2017 2/6/2018 4/6/ For Personal Use Only Forwarding Or Distribution Not Permitted /4 10/25 11/15 12/6 12/27 1/17 2/7 2/28 3/ Daily Settle Heating Oil vs. Natural Gas HO NG HH Spot Price

16 16 For Personal Use Only Forwarding Or Distribution Not Permitted Weekly Update Disclaimer and Key Bespoke Weather Services, LLC believes all information contained in this report to be accurate, but we do not guarantee its accuracy. None of the information in this report or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Key: CFSv2: American climate model guidance CPC: Climate Prediction Center Analog: Previously occurring weather pattern that has similarities to the current one GEFS: Global Ensemble Forecasting System, American modeling guidance Teleconnections: Atmospheric indices that measure expected orientation both of upper and lower levels of the atmosphere (ie. MJO, NAO, AO, PNA, etc.) Bearish Bullish Current Analysis Last Week s Analysis MJO: Madden/Julian Oscillation, a measure of global convection (storminess) placement GWDDs: Gas Weighted Degree Days (calculated by combining Population Weighted Cooling Degree Days (PWCDDs) with Utility Gas Weighted Heating Degree Days (UGWHDDs) EIA Forecasts: Our forecast for the weekly change in natural gas stockpiles, going out three or four weeks Note: All above information is part of this informational key, and is not updated daily. For more terms, definitions, and explanations, see our subscriber-only glossary here.