Welcome to the bull stampede edition of Natural Gas Daily!
Housekeeping item first.
We expect a +90 Bcf change in the storage report for the week ended September 27. A storage report of +90 Bcf would compare with +42 Bcf last year and +84 Bcf for the five-year average.
We were stopped out of our DGAZ long position at $17. We currently do not have an active position at the moment.
Bullish Weather Forecasts Over The Weekend Sends Prices Higher
Natural gas prices are grinding higher again today after total degree days (TDDs) came in higher by 9 over the last 24 hours. This follows what was a series of bullish weather model revisions over the weekend.
Now most of the weather models are showing higher than normal demand into the middle of October and based on the ECMWF-EPS long-range weather outlook released yesterday, the bullish weather is expected to continue into the end of the month.
Last week, we took on a new short NG position via long DGAZ betting that the early November weather outlook would turn bearish, but the latest outlook has shifted from bearish to neutral, which has further boosted natural gas prices.
In the face of the bullish weather outlook, EOS has now been revised down to 3.245 Tcf, and it's safe to say no one in the trading community is watching Lower 48 production anymore despite averaging almost ~84 Bcf/d in September.
With natural gas storage entering heating demand season at record lows, the volatility resulting in any bullish weather surprises could push prices significantly higher. In addition, with the natural gas market so reliant on production, any freeze-offs or supply disruptions could spike spot prices as well. Similarly, bearish or warmer than normal weather will have a profound effect as the higher production would meet much lower heating demand, which would send storage draws lower.
Overall, the market has been extremely volatile with volatile weather model revisions explaining the recent volatility. The natural gas bulls will have the weather gods on their side into the end of October.
For readers who are interested in receiving real-time trade alerts along with our exclusive natural gas fundamental, weather, and trader positioning updates, we highly recommend you to give HFI Research Natural Gas a try. You can see here for more info.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.