Friday, December 28, 2018

"Natural Gas Bears on Santa’s Nice List as Forward Prices Plunge Again"

Just so you know, that's not me doing the 'Santa' schtick, that is the nose-to-the-grindstone, very, very professional crew at NGI.
This piece was written before the EIA reported, the futures were already down and the report didn't do much one way or another. Front futures 3.328  -0.218 .
From Natural Gas Intelligence, Dec. 28:
Natural gas prices continued to retreat from recent highs, with January tumbling 20 cents on average during the Dec. 19-26 period as mild weather was expected to continue through the first week of the new year.

The sharpest declines occurred in the Northeast, where truly intimidating cold was expected to remain at bay for most of the next couple of weeks. Meanwhile, the end of several pipeline events in and around the Permian Basin lifted forward prices there by the double-digits, according to NGI’s Forward Look.

Light holiday demand and mild weather blanketing much of the country leading up to the Christmas holiday put market bears in control of forward markets for the better part of the Dec. 19-26 period, although some hints of cold returning in early January were enough to revive markets Friday and again on Wednesday.

Still, some market observers saw Wednesday’s rally as more reflective of the typical volatility that accompanies the expiration of Nymex futures contracts. The January contract is set to expire Thursday, and sure enough, prices were up about a nickel at the start of trading but then fell to a roughly 10-cent discount to Wednesday’s settle later in the morning. The prompt month went on to expire Thursday at $3.642, up 9.9 cents on the day. February rose 8.8 cents to $3.546.

On the weather front, the overnight Wednesday European weather model guidance showed slightly more cold risks at the end of the run but still indicated a generally mild pattern winning out before then as gas-weighted degree days (GWDD) easily run below seasonal averages, according to Bespoke Weather Services.

Overnight Global Ensemble Forecast System (GEFS) model guidance was decently warmer, sending gas prices initially lower before the more bullish ending on the European guidance, which indicated more of a negative Eastern Pacific Oscillation ridge upstream that could lock cold in the East.
“This is a trend we do expect models to gradually move towards into next week, but we also note that GEFS guidance has been breaking this ridge down occasionally and limiting eastern cold,” Bespoke chief meteorologist Jacob Meisel said.

Although Bespoke sees risk skewed colder beyond Jan. 10, weather models “are still noisy and struggling” to show much cooler weather with the gradual Madden-Julian Oscillation (MJO) progression.

The tropical MJO remained on track for phases 7 and 8 during the 11- to 15-day period, according to Radiant Solutions. Historically, these phases have resulted in a colder outcome across the Eastern half of the United States this time of year.

“However, models are reluctant to weaken tropical convection west of the International Dateline or firmly extend that convection eastward. As a result, this lowers confidence in the forcings role in changing the pattern,” the forecaster said.

The midday data on Thursday continued to show a strong cold shot sweeping across the country Jan. 2-4 but with a milder trending break Jan. 5-7. The data still showed at least some cooler air arriving across the East Jan. 8-10, but it was not as cold as the data showed a couple days ago, according to NatGasWeather.

“Overall, weather patterns don't look quite cold enough the next couple weeks besides the Jan. 2-4 system,” the firm said.

Meanwhile, the recent and coming weather patterns are expected to lead to storage withdrawals that are lighter than five-year averages for the next two Energy Information Administration weekly storage reports, according to NatGasWeather. The expected pulls would improve deficits from 720 Bcf to near 620 Bcf, then stall or improve a little further in the weeks after, the firm said.
“Deficits will still be quite hefty, but for the markets to regain the bullish fire, the markets clearly want sustained cold, which the overnight weather data failed to provide due to notable breaks between cold shots,” the firm said.

The Energy Information Administration (EIA) is scheduled to release its weekly storage report at 10:30 a.m. ET on Friday, a day later than usual due to the Christmas holiday....MUCH MORE
Watching the MJO, qu'est-ce que c'est?
Usually we speak of its propagation during hurricane season but here: Polar Vortex  qu'est-ce que c'est.