The rest of the week of January 13th, 2025 Today's briefing: As expected, the price gapped up at Sunday's opening from panic buying after the weekend model runs turning colder, bullish momentum from Friday, and news of Friday's LNG nominations at all time records. Unfortunately this was not enough to keep the gains versus the bearish news of Monday morning. Troubles at Freeport LNG facility and Sabine pass reminded the market of the continued issues with LNG processing during bouts of cold weather, similar to last years issues. Something to think about if the freeze makes it down to the GOM end of week!!! Freeport continues to be problematic with its processing facilities, and it continues to be used as a good impetus for any profit taking when the time becomes convenient. The nature of Natural Gas trading is such that big swings in price are followed by any bit of news to the bullish or bearish side, so always be on the lookout for any news, what so ever, to move pricing in the opposite direction. Couple this decline in LNG daily exports with forward month backwardation, and a return to normalcy in front month pricing. Which we saw today.
This week expect to see large range bound trading (20-30 cents/day) before the EIA report. The report will be the big news maker before the holiday weekend in the US. Expect a bit of profit taking before the week ends, for position closing for the long US weekend. I am hoping that with model runs continuing to see the end of January cold and with the NGI estimated 259BCF for the period ending January 10th, we will see price rebound to the $4.200 level before profit taking begins. If there are any surprises in the outlook for the cold to come and the report disappoints, then we could see pricing fall to lower support levels below the 20 SMA at $3.621 level. We have closed daily below the 20 SMA only two times since the contract rollover from October into November and this continues to be a good support level until it does not!
But the hope follows that forecasts show enough frigid air over the United States for surpluses to the five-year average currently at more than 207 Bcf “to be completely wiped out and likely to flip to deficits after the next three EIA reports,” according to the forecasts.
“As opposed to cold snaps in recent winters, which have been brief and bookended by mostly warm weather, January is shaping up to be a full month of colder-than-normal weather across key population centers,” Huenefeld said. This will be verified with continued cold model runs and a 250+BCF withdrawal. This will set up the price action back up to the $4.200 level, and possibly beyond.
So, talking about beyond. As we look at the synoptic weather models, we look at modeling 3-6 weeks out. Up until late last week, the models were consistently showing the cold retreating back into northern Canada and the continuation of the Polar Vortex to relax to it's more circular pattern with the Northern Hemispheric winter weather season. The equatorial weather pulses, as telegraphed by the MJO, were also showing an injection of mild Pacific air into British Canada and the US Pacific North west. Which is common for a weak La NIna, which we are in. This was being modeled and seen for a warmer period from the end of January into the first 2-3 weeks of February. A general relaxation of the Polar Vortex, and the injection of mild Pacific air, was being accepted as a January thaw, typical of the winter season, and in a weakened La Nina state.
Remember that institutional investors, who we are competing against, are looking at the same information. They will begin planning on trading this information 10 days before the event happening. This is common in the energy markets. Trade the news 10 days before the little fish hear anything about it. Then sell the news of rumors that the little fish are talking about. Remember I was discussing the Polar Vortex and the opening of Plaques and Corpus Christi two weeks before there was any news on the wires. We joked about a PoLAr VOrteX, but doesn't seem so funny when it actually happens and pays out two weeks later. Back to the weather.
Last week, there were signs of another, 5th and 6th, elongated Polar Vortex, being seen in the long range model. Plus the EPO, a teleconnection that measures the pressure in the eastern Pacific ocean started to turn favorable. This is starting to show high pressure rebuilding over Alaska, which rotates clockwise and pulls air down from northern Canada and the Artic. Couple this with the Polar vortex splitting again in its elongated state. And now we are talking about another bout of cold artic air being injected into the US. Except we are seeing this shift westward over the highly populated centers of the US Midwest, as opposed to the US north east. I have attached some visuals which show the Polar Vortex the negative EPO in the models and an explanation of how they effect the weather. I will continue to monitor and update as they verify true or false. If they do, we can expect the Widow Maker contracts to bring life back to a bull market in NG. Now take that you B1t*H!!!
This brings us to the second factor in pricing, storage - injection and withdrawal. The expectation is for the first trillion cubic foot withdrawal for any month. If the warmer weather verifies and the 1 TCF verifies, which is the base case scenario, industry experts estimate that at the end of withdrawal season, the last week in March. That NG storage will be somewhere in the 1700-1800 BCF. Which will be the second lowest in 30 years and 550 BCF versus last winter. This coupled with the fact that Corpus Christi LNG facility is expected to open two more trains before April and Plaques running at full capacity, this could add another 1 BCF/ in demand. But this is all a big if. But something i will be watching out for daily.
I am non-committal about anything other than the next 5 days in the NG market. Which I see at higher prices than today. But I have and will be wrong, so do not take this as investment advice. Just where I see the upcoming fundamentals playing out. NG is the most volatile asset/commodity traded. So always expect a pullback on any bit of bad news after the price spikes, or pop up on any bit of good news after the price dumps. Has been and will always be the nature of NG. Again, why real time weather and industry news is so important.
My next post will be on what and where to look for the fundamental news to front run these pops and dips. All of the news is behind paywalls. But I speak from experience that every dollar spent pays for itself and then some. In the meantime I will throw you some fish as I hopefully teach you to fish yourself. An educated informed trader/investor makes the market more transparent, predictable and profitable.
So here's the new tagline. "Keep it burning boys!"
