The SMC Report – Natural Gas

March 4, 2019 2:49 pm
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In our seasonal approach to the market, we break the year down into 4 seasonal periods.   We are now in the January-March winter period in which market decline is the predominate tendency.  In late December, we had put forth expectations for several market swings in the winter period which are discussed fully in our monthly and weekly reports.  Our assumptions going in were that we would see several large market swings with the initial one to the upside and then a final downward swing to end such movement in late February or March.

As to the current situation, as anticipated, the first January-March winter seasonal market swing was to the upside, as we had thought, and actually topped out in the mid to upper $3’s as we had targeted.  After achieving $3.722 on January 15th, it has drifted all the way back down to as low as $2.543.  The downside was facilitated by the elimination of the year-over-year storage deficit and the failure of February weather to live up to expectations in the eastern US.  We consider this deep downside to be part of the large downward swing that we anticipated would conclude our winter seasonal in late February or March.  Please review our full body of work as to our thoughts on how deep and how long this decline might go.  We consider that we are a little over 2-weeks into another modest recovery phase that is one of the anticipated countertrend bounces.

As discussed the last 3-weeks, there has been some year-over-year similarity in both fundamentals and market movement since early December, and so, we have begun referencing last year’s movement in how we think the more specific movement here in our current January-March winter is going to play out.

Looking ahead, after the $2.543 low on February 15th, we consider that we have transitioned into a multi week recovery move much like we had last year.  The one last year eventually gave way to an attempt to extend our winter low point later in March, and we’ve been anticipating the same late season movement for this year.  The recovery movement has extended to the $2.80’s area much like we were anticipating.  With a high water mark at $2.908 on February 26th, we look for the recovery movement to end at such time as it looks like the late February/early March arctic temperature pattern is going to break down.  There were hints that this might occur late last week, and we’d suggest paying close attention to this possibility first thing this coming week.  We still look for a serious attempt to extend our $2.543 low point here in March.

As to the coming week, the NYMEX natural gas futures market is currently resting about 14-cents higher than the previous week at $2.859 after a week where it first gapped higher by 4-cents to open the week at $2.757 and then, after setting a new high water mark of our 2-week recovery at $2.908, closed the week relatively strong at $2.859.  As to the coming week, we view somewhat more in upside as possible if 6-10 and 8-14 day temperature forecasts show continuing arctic cold, but we look for the market to begin tailing off if such forecasts flip back toward a normal or above temperature regime.        

 

Much more detail on projected price level and timing of market movement for our entire January-March winter season is included in our weekly SMC Natural Gas publication.  Our publication can be sampled by contacting us at (501) 240-6700 or SMCnatgas@aol.com.

Bio of SMC natural gas advisory service:

SMC is registered with the Commodity Futures Trading Commission ("CFTC") as a Commodity Trading Advisor ("CTA"), and as such, it has had the ability to trade speculatively for others and to provide advice to outside entities in regard to movement in NYMEX natural gas futures.  At this time, SMC is solely engaged in the latter activity.    

SMC was incorporated in 1988 and business endeavors have included founding, growing, and selling a natural gas marketing company, speculative futures trading, and, since 2003, a natural gas futures advisory service specializing in upcoming market movement.  All endeavors with SMC have been successful with speculative proprietary trading activity especially so.  As such, SMC market perspective and advice is backed with a successful track record in natural gas futures that began in 1991.  Please feel free to call or email SMC with inquiries or questions at (501) 240-6700 or SMCnatgas@aol.com

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This post was written by Louis Rose