Natural Gas: Triple-Digit Storage Builds Are Coming

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Includes: BOIL, DGAZ, KOLD, UGAZ, UNG, UNL
by: HFIR Energy
Summary

We expect a +88 Bcf change in the storage report for the week ended April 12.

A storage report of +88 Bcf would be much higher than last year's -36 Bcf and +38 Bcf for the five-year average.

We were stopped out of our UGAZ position at the open yesterday for a loss of ~6%. We currently do not have any positions on.

We are forecasting an average 100+ Bcf build for 4/26, 5/3, and 5/10 week.

November storage has been revised to 3.65 Tcf, so the lack of storage worries are gone.

Welcome to the Triple-Digit Storage Build Edition of Natural Gas Daily!

Housekeeping item first.

We expect a +88 Bcf change in the storage report for the week ended April 12. A storage report of +88 Bcf would be much higher than last year's -36 Bcf and +38 Bcf for the five-year average.

Trading Position

We were stopped out of our UGAZ position at the open yesterday for a loss of ~6%. We currently do not have any positions on.

Triple Digit Storage Builds Are Coming...

The weather gods are not as friendly to the natural gas bulls as they were last year.

Both ECMWF-EPS and GFS-ENS are forecasting natural gas demand to be in line with the 30-year average for the next 15 days. And, the latest outlook from the ECMWF-EPS long-range outlook shows TDDs to be smack at the norm as well.

Without the bullish weather backdrop, the market will feel the full force of the surplus in the natural gas balance today.

We estimate that the market is oversupplied by 3.33 Bcf/d, which is to be expected as supply continues to outpace demand. As a result, we will see natural gas storage surpass 2018 levels by next week's report.

Our November storage forecast also has been revised up to 3.65 Tcf. This has basically eliminated the worries about the lack of storage.

So, over the next few weeks, readers should expect large storage builds. Seasonally, natural gas demand will reach a low in early May, so even if we get a very warm start to May, the cooling demand is not sufficient to offset the surplus. The impact of stronger cooling demand will only kick in toward the end of May and into June. As a result, natural gas bulls could be in for a rough ride in May.

For us, our bullish trading position was predicated on the bullish April weather outlook. With the weekend's weather models turning bearish, we were stopped out of our long positions on Monday. We have no intention of going long or short in the near term.

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.