weather from celsius
Posted: Mon Dec 05, 2022 1:22 pm
Natural gas prices tumbled on Friday as both the GFS and ECMWF models trended aggressively warmer for the first two weeks of December.
14-Day Daily GWDD Outlook
Figure 1: Click here for more information on on the near-term temperature outlook.
The front-month January 2022 contract slid 46 cents or -6.8% to settle at $6.28/MMBTU. It was the commodity’s third straight daily loss. On the week, natural gas plunged a sharp -10.5%, snapping a two-week winning streak. The close was the lowest since November 14.
Prices were pressured lower late in the week first and foremost by a bearish turn to the early December temperature outlook. Readers may remember that, during the previous week, the GFS and ECMWF models had been hinted at an impressive, sustained arctic outbreak during the first two weeks of December as a Greenland Block funneled arctic air into the densely-populated Northeast. This then pivoted to a more seasonable pattern with quick-hitting shots of arctic air. And, then, by late last week, the models began to give up on the idea of colder-than-normal temperatures all together. Over the weekend, this trend persisted. As shown in the Figure to the right, my Consensus Model—which integrates a performance-based average of GFS OP, GFS ENS, and ECWMF ENS data—is showing below-average gas-weighted degree days (GWDDs) for at least the next 10 days through December 14, with some days in the next week seeing as much as 10 GWDDs fewer than normal. By the third week of December, temperatures may start to pivot colder with GWDDs climbing back to normal levels but, at this range, such a forecast is far from assured. As of Sunday evening, my Consensus Model was calling for just 376 accumulated GWDDs for December 5-18, the second fewest for the period in the last 5 years, albeit well above last year’s tepid 288 GWDDs.
As a result of this milder-than-normal outlook, I am now projecting that natural gas inventories will flip back to storage surpluses versus both 2021 and the 5-year average, as shown in the Figure to the right, although such surpluses will likely remain modest for now.
Prices may have also been pressured late last week by news that a railroad strike—which could have potentially driven dramatic coal-to-gas switching—had been averted and by news that Freeport was pushing its return-to-service date back slightly from the middle of the month to late December.
Based on these factors, I expect natural gas prices to face additional downside pressure to start the week and I would not be surprised to see the commodity fall below my $6.00/MMBTU downside price target. Despite the mild outlook, I am not revising this target lower. It is still early in the season and any consistent indications of a cold late December or January outlook will still likely lead to buying. And, even though its return has been delayed yet again, Freeport could be adding an additional ~60 BCF/month of demand by January. On a move below $5.75/MMBTU my sentiment will transition from bearish through neutral and over to cautiously bullish.
So the gassers are getting creamed today. CRK is down 25 % for the month with the crap hedges and crap conversion play. The company could of hedge the dilution JJ holding by buying in the single digits in the 7-8's in April of this year. Do these guys understand the market and their own bullish forecast???
I don't think they work for us, they work for JJ
14-Day Daily GWDD Outlook
Figure 1: Click here for more information on on the near-term temperature outlook.
The front-month January 2022 contract slid 46 cents or -6.8% to settle at $6.28/MMBTU. It was the commodity’s third straight daily loss. On the week, natural gas plunged a sharp -10.5%, snapping a two-week winning streak. The close was the lowest since November 14.
Prices were pressured lower late in the week first and foremost by a bearish turn to the early December temperature outlook. Readers may remember that, during the previous week, the GFS and ECMWF models had been hinted at an impressive, sustained arctic outbreak during the first two weeks of December as a Greenland Block funneled arctic air into the densely-populated Northeast. This then pivoted to a more seasonable pattern with quick-hitting shots of arctic air. And, then, by late last week, the models began to give up on the idea of colder-than-normal temperatures all together. Over the weekend, this trend persisted. As shown in the Figure to the right, my Consensus Model—which integrates a performance-based average of GFS OP, GFS ENS, and ECWMF ENS data—is showing below-average gas-weighted degree days (GWDDs) for at least the next 10 days through December 14, with some days in the next week seeing as much as 10 GWDDs fewer than normal. By the third week of December, temperatures may start to pivot colder with GWDDs climbing back to normal levels but, at this range, such a forecast is far from assured. As of Sunday evening, my Consensus Model was calling for just 376 accumulated GWDDs for December 5-18, the second fewest for the period in the last 5 years, albeit well above last year’s tepid 288 GWDDs.
As a result of this milder-than-normal outlook, I am now projecting that natural gas inventories will flip back to storage surpluses versus both 2021 and the 5-year average, as shown in the Figure to the right, although such surpluses will likely remain modest for now.
Prices may have also been pressured late last week by news that a railroad strike—which could have potentially driven dramatic coal-to-gas switching—had been averted and by news that Freeport was pushing its return-to-service date back slightly from the middle of the month to late December.
Based on these factors, I expect natural gas prices to face additional downside pressure to start the week and I would not be surprised to see the commodity fall below my $6.00/MMBTU downside price target. Despite the mild outlook, I am not revising this target lower. It is still early in the season and any consistent indications of a cold late December or January outlook will still likely lead to buying. And, even though its return has been delayed yet again, Freeport could be adding an additional ~60 BCF/month of demand by January. On a move below $5.75/MMBTU my sentiment will transition from bearish through neutral and over to cautiously bullish.
So the gassers are getting creamed today. CRK is down 25 % for the month with the crap hedges and crap conversion play. The company could of hedge the dilution JJ holding by buying in the single digits in the 7-8's in April of this year. Do these guys understand the market and their own bullish forecast???
I don't think they work for us, they work for JJ