This is a tremendous short opportunity, the whole key, of course, is the timing. Long speculators have piled into natty by the tens of thousands of contracts.
Here's the daily chart from FinViz:
and the weekly:
Calls For Even More Cold Send Natural Gas to 31% ’14 Gain
The bitter, nasty winter in the Northeast isn’t over. A fresh storm Tuesday and jitters over more cold to come sent the market for natural gas on another upswing....MORE
The most actively traded gas futures contract jumped 6.1% to settle at $5.51 per million British thermal units, a three-week high and a 31% surge year-to-date.
From the Wall Street Journal’s Christian Berthelsen:
Gas inventory levels are already at a 10-year low after a severe winter in many parts of the country, and traders expect more cold weather will further reduce supplies. Analysts are expecting another large withdrawal from inventories in weekly U.S. government data to be released Thursday.Maxim Group’s Ronald J. Barone argued in a morning note that the path of least resistance actually looks to be lower, both in the short run and the very long run (3-4 years):
“It’s no surprise that forecasts for below- to well-below-normal temperatures across the East next week and severely depleted storage levels are providing a boost to the market,” Addison Armstrong, an analyst with brokerage Tradition Energy, said in a note.
Given the outlook for moderating temperatures over the next few weeks, we expect further slippage in the March contract. Despite the volatility in prices this winter, prices have been more stable further out in the curve. We continue to believe gas prices above $5 are not sustainable over the next 3-4 years....
And from Reuters:
UPDATE 3-U.S. natural gas futures hit 5-year high as cold crimps supply
* More winter weather expected for large parts of U.S.
* End-of-winter storage seen below 1 trillion cubic feet
(Rewrites top, adds analyst's comment, EIA poll estimate, updates prices)
By Jeanine Prezioso NEW YORK, Feb 19 (Reuters) - U.S. natural gas futures jumped nearly 13 percent on Wednesday to the highest in more than five years, boosted by forecasts for frigid cold weather across the United States that will further increase gas-fired heating demand and deplete supplies. As prices rose, traders bought futures contracts to cover short positions and speculative money poured into the market, further advancing the rally, brokers and analysts said.
The front-month gas futures contract was on track for its largest daily percent gain since June 2012, when it surged 14 percent. Natural gas futures for March delivery added as much as 70.8 cents, or 12.7 percent, by mid-afternoon to reach a high of $6.259 per mmBtu, the highest since December 2008. "This test of $6.00 stinks of speculative involvement," Aaron Calder, senior market analyst with Gelber & Associates in Houston, said in a client note.
"Managed money is taking advantage of the imbalance and pouring into the long side of the trade." Weather forecasters expect frigid temperatures to continue after record-cold weather in January led to steep draws of natural gas to meet heating demand, leaving less gas to meet summer electric power demand.
The 11-15 day forecast points to "ongoing colder than normal conditions" over much of North America, said meteorologists at MDA Weather Services in Gaithersburg, Maryland. Temperatures in Chicago will reach sub-zero (Fahrenheit/below minus 18 degrees Celsius) at the end of next week while New York temperatures will reach into the teens, according to the MDA forecast.
March gas futures on the New York Mercantile Exchange were last trading 64.9 cents higher at $6.20 per mmBtu at 1:53 p.m. EST (1853 GMT). The March contract traded as much as $1.22 over April, widening the spread between the two by some 95 cents in one week. "The rally is confined to March, but as time goes by the seriously depleted storage level is going to catch on," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut. "The back of the board has some catching up to do."...MORE
