The SMC Report – Natural Gas

March 19, 2019 3:34 pm
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This Week’s Market Comments:

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 seasonal 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 in late January 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 have been in a late winter season, weather inspired, countertrend bounce that we have anticipated would give way to a late season attempt to extend our winter seasonal low point of $2.543 somewhat further.

As to where we are now, our last week’s idea of the 3-week recovery being close to concluding appears to have been on target.  While certainly not all that decisive, the market did break downwardly out of the previous week’s tight consolidation range and eventually drifted to a 7-cent lower weekly close at $2.795.  The huge 204 Bcf storage withdrawal on Thursday had the market looking as if it might recover from its early week weakness, but on Friday, market participants finally were able to begin focusing on upcoming storage improvement and a milder temperature pattern and this appears to have provided the lower weekly close that we looked for.

Looking ahead, our chart movement from last year and this year still looks very similar at this point, and with both storage and weather flipping into bearish trends, we anticipate some more downside in the coming week.  If some decent downside can get underway, we would consider the idea of a challenge of the $2.543 low point to be in play, but if the market doesn’t get pretty soft rather quickly, we will begin to have some serious doubts about a return to that level here by the end of the January-March winter seasonal period.

As to the coming week, the NYMEX natural gas futures market is currently resting 7-cents lower than the previous week at $2.795 after a week where opened lower and then again chopped sideways (but in a lower range), and eventually closed closer to the bottom of the weekly range.  As long as the weather outlook remains uneventful for late March and April, we look for the outlook for year-over-year storage improvement to provide some degree of additional downside in the coming week,

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