Thursday, January 23, 2020

Natural Gas: EIA Weekly Storage Report

This is the last hurrah for anyone who wants to be bullish.
We are about to start trading the March contract as the front futures. However....see after the jumps
First up FX Empire with the expectations going in to today's release:
....Traders are looking for a lighter-than-average withdrawal for Thursday’s EIA storage report. Last year, the EIA recorded a 152 Bcf withdrawal for the similar week, and the five-year average is a withdrawal of 194 Bcf....
.... Bloomberg analysts see a median withdrawal of 88 Bcf. Reuters predicts a 91 Bcf pull, with guesses ranging from minus 84 Bcf to minus 115 Bcf.

NGI’s model predicted a 98 Bcf withdrawal for Thursday’s report, which covers the week-ended January 17. Energy Aspects sees a 97 Bcf withdrawal.
From the Energy Information Administration:
for week ending January 17, 2020   |   Released: January 23, 2020 at 10:30 a.m
Working gas in storage was 2,947 Bcf as of Friday, January 17, 2020, according to EIA estimates. This represents a net decrease of 92 Bcf from the previous week. Stocks were 554 Bcf higher than last year at this time and 251 Bcf above the five-year average of 2,696 Bcf. At 2,947 Bcf, total working gas is within the five-year historical range....MUCH MORE 
From the CME, the action since the release:
1.937 up 0.032

And finally, back to FX Empire who caught some smart observations from INTL FCStone:
Oversold Technical Indicator? How About Gigantic Short Position

We’re not talking about a coincidental smoothed mathematical oscillator, we’re talking about real raw data.

Natural Gas Intelligence (NGI) reports, “As a group, speculators are about as net short on natural gas as they’ve ever been,” according to INTL FCStone Financial Inc. Senior Vice President Tom Saal.
“The way I calculate it, it’s the largest net short since 2006,” Saal told NGI, noting that 2006 is as far back as his dataset goes. “As far as getting more short, that’s the $64,000 question. Can the speculators get more short? And the answer is, of course they can. To get more net short, I would think you’d need more money, more new shorts” entering the market.”

Saal said he was “surprised” by the “aggressive selling” that has seen the February contract drop from above $2.20 as recently as last week to now down well below the $2 mark. This move lower occurred with “pretty good volume,” he said. As for Wednesday’s price action, “it didn’t look like new selling coming into the market, and it didn’t look like any new buying either. I think people were trying to figure out what happened.”

The extent of the net short position for speculators raises the prospect of prices rallying on buying momentum from short-covering, according to Saal.

“What you have now is a situation where they have unrealized gains,” he said. “That looks good on paper, but until you actually cash in the trade you haven’t made any money yet. So yeah, there’s some major league buying coming, and if it’s the speculators covering shorts, it’ll be motivated buyers.”
And that's it. The weather is going to warm over the next four weeks, decreasing fundamental demand so pent-up buying is where any rally will have to originate.

More on the weather after the EIA Weekly Update comes out late this afternoon.