Price action in the natural gas market has been quite bullish for the last few weeks, and understandably so, as supply / demand balances are running very tight thanks to new highs in LNG volumes along with production sitting much lower vs. last year. This balance was on full display in last week’s EIA storage report, with 2020 running much tighter than the same week in recent years.
With any supportive weather at all, prices could continue to soar much higher. We began to see signs that mother nature was not going to cooperate with natural gas bulls, however, at the end of last week. This prompted us to alert clients to downside risk in prices in our Friday afternoon report, with our sentiment moving to a slightly bearish stance, despite the strong fundamental backdrop.
The weather forecast did indeed shift much warmer, with 15-day forecast GWDDs well below normal from both the GEFS and ECMWF EPS.
Our official forecast this morning was almost a whopping 70 GWDDs warmer than normal, equating to nearly 100 bcf in terms of natural gas demand, just in a 15-day period!
As it stands currently, this would be the 7th warmest November on record, per our GWDD dataset, even assuming the days beyond day 15 are no warmer than normal.
Should the warm regime hang on into late November, we could easily move into the top five.
Prompt month natural gas prices have responded by moving more than 25 cents lower so far for the week.
We cannot stress enough the importance of having both weather and fundamentals data, including storage modeling, at your fingertips this season if you are active in the natural gas markets. We can help fill that void at a very affordable cost!
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Originally Posted on November 3, 2020 – Warm Weather Torpedoes Natural Gas Prices
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