Nat Gas trading week 1/12-1/17This weekends weather models trended a little warmer versus the model data midday Friday. With a break in the cold to below normal HDDs over the US late this week but trended further colder with an Arctic blast into the US Jan 19-24. The weekend models showed the GFS had been 4-5 HDDs colder until warming up a bit in the latest midday Sunday run to finish less than 1 HDD changed versus Friday’s midday data. The EC, on the other hand, trended 10 HDDs colder, The Euro model now sits a full 17 HHDs colder than the US model for the time period.
The important thing to come out of this weekends model data is that enough cold artic air will be in place for the next three EIA reports to print withdrawals of 200BCF/week print three. It has been noted by industry experts that this could possibly be the first TCF withdrawal in a month ever. That is TCF, or Trillion Cubic Feet!!!!
Temperatures are expected to moderate later in January, sometime around the 25-26. Demand is expected to normalize after this period. Except the European model is showing a slowing of this. It is going to be watched very carefully if a new frigid organizes over Canada and discharges into the US again. Longer range models are beginning to show this possibility happening. With this being the third discharge of artic air this winter, the atmospheric trend could lay the ground work for future cold air.
I will post more on this later, which is my thinking for the second half of winters set up and direction.
But for now, production is coming back online in the Permian and Marcellus, after 6 BCF of freeze ins this past week. The big watch on the production side will be next weekend and the possibility of massive freeze in all the way down to south Texas and Louisiana coast. Which could possibly effect the LNG market, but in a bad way. Like last year and the disruption with Freeport and loss of production, before NG dropped down the $2.20. We will need to see production nominations early tomorrow am to verify gas flowing again after the moderation in temps this weekend. Another issue with production is Canadian imports, which are running the highest in record. With historic surpluses in Canadian storage, and 15% of production curtailed over the early December timeframe, the Canadian's have been turning the taps on to historic levels. SO a lot of news before the market opens tomorrow in NY. We have tonight's open, 0Z weather models, gas nominations for production and LNG exports, Canadian imports. All which have been other than normal lately.
As for the California fires, the only issue at hand is regional pricing spiking in the Southern California spot market, so no issues expected in production or supply.
I expect the market to gap higher at open tonight, if it does not, it is not because of weather or supply/demand balance. I also expect daily swings in the 20-30 cents, centered around model releases.
I have been inclined to believe that February will be warm, as statistically in the past 13 years it has been warmer than January. The peak HDD is around January 26-27, depending on being a leap year or not. But I am seeing and hearing otherwise, and I am continuing the research to verify that information. Remember we trade on weather which is 10 days out from the data released. So the direction of the market was determined 10 days ago when this period was verifying in the model runs 10 days ago. So, it is very important to look at the 3-6 week weather patterns, to begin to see where supply/demand fundaments will head. But more on that later.
