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Natural Gas - April Cold Expected To Last Into The Second Half

Apr. 06, 2018 4:00 PM ETUNG, UGAZF, DGAZ, BOIL, KOLD, UNL, DCNG, GAZ15 Comments


  • Weather models flipped 180 last night and turned bullish for the second half of April.
  • April 2018 is now on track to be the third coldest April since 2000.
  • A bullish weather scenario for the injection season would require ~83.5 Bcf/d of production to push us back to the 5-year average by November.

Welcome to the holy moly edition of Natural Gas Daily!

The weather models did a 180 last night with ECWMF-EPS showing a +24 HDD revision over the span of 24 hours.

Commodity Wx Group tweeted two days ago that April 2018 was already on track to be the third coldest April since 2000, and it looks like it just got a lot colder.

Source: Commodity Wx Group

The bullish weather forecast has now derailed our short UGAZ bet as one of the key tenants to being bearish going into the second half of April was for the weather to flip from bullish to bearish. That is now no longer the case, and we have closed our UGAZ short at a profit.

The next set-up could very well be to the long side depending on the weather set-up going into the end of April. The latest update removed 25 Bcf of storage from our forecast, and it looks like we will finish April with a deficit of more than 800 Bcf to last year.

Even though production continues to track the bear case, the bullish weather outlook will help supplement part of the oversupply during the shoulder season, and if the weather remains bullish, then the impact of higher production will be more than offset by bullish demand increases.

At the moment, we will run three scenarios into what we expect storage will look like through the injection period. For 2018, in order for natural gas storage to meet the 5-year average by November, the base case requires Lower 48 production to now average ~81.5 Bcf/d. If the weather is bullish, however, throughout the injection season, this figure rises to ~83.5 to ~84 Bcf/d. And if the weather is bearish, then today's supply will be enough to push us back to the five-year average.

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