The Gas Crash Continues

The natural gas crash continued today, with the January contract giving back almost 8% on the day after a solid gap down last evening. 

natural gas commodity weather

The entire natural gas strip got sold hard today, but losses were by far the most significant for the next few winter months, as forecasts remained warm and the winter premium from storage concerns is rapidly getting priced out of the market. 

natural gas commodity weather

This is of course best seen on the H/J March/April spread, which encapsulates the "stockout" fear (or fear that natural gas stocks get dangerously low before the end of high demand/storage withdrawal season in March). 

natural gas commodity weather

The spread is not yet where it was before prices spiked in November, but it is moving much closer to those levels and is over $1 off the highs. This comes on continued confidence that warmth dominates through Week 2 and into the end of December, as seen in the latest Climate Prediction Center forecast here. 

natural gas commodity weather

Our clients were warned of this, as we warned in our Friday Pre-Close Update that weather model guidance would maintain many of the warm risks that pressured prices on Friday and not provide any clear indication of cold returning. 

Then this morning in our Morning Update we highlighted that "we do not see much reason for prices to move much below $3.75, and would look for $3.5 to be firm..." as weekend models fit our expectations well. 

natural gas commodity weather

Sure enough, the January contract spiked up to $3.742 this morning before reversing and selling off through the day, setting a low at $3.516 and fitting our expectations almost exactly. We noted that though models were actually a touch cooler than we had forecast on Friday in our "Monday Expected" forecast, Week 3 forecasts in our Morning Update had trended even more bearish and we forecast that 12z model runs today would continue that trend. 

natural gas commodity weather

natural gas commodity weather

Warmer PM model runs, and especially very warm European model guidance, seemed to help keep prices right near support and limit any rallies as we continued to see widespread warmth in the medium-range on American GEFS guidance as well (images courtesy of Tropical Tidbits). 

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In our Afternoon Update we outlined how natural gas price risk appeared skewed short-term as well, and broke down PM weather model guidance. To give all our detailed weather and natural gas-driven ...

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Karen Klein 3 months ago Member's comment

How low do you think it will go?