The SMC Report – Natural Gas

April 2, 2019 8:19 am
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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 have actually concluded the normal January-March winter period in which market decline is the predominate tendency.  However, a final winter decline can sometimes extend into early April with key fundamentals that are trending bearishly.  We appear to have that situation this year and so we are still considering our late winter seasonal decline to be in progress.  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 are in our anticipated, attempt to extend our winter seasonal low point of $2.543 somewhat further.  This attempt has been in effect since March 19th.

The question at this point, is whether this “final” attempt to extend our low beyond $2.543 will be successful.  We had noted in our previous week’s report, when the  market was sitting at $2.753, that final winter seasonal decline phases have been known to extend a week or two beyond the end of March when key fundamentals are trending bearishly.  With this last week’s bearish weather outlook and confirmation of the looser supply/demand balance, it appears we are poised for some notable improvement in the storage deficit through April.  As such, the market extended our late season pullback further last week by another 9-cents to $2.656, and it appears to be still pointed lower going into April.  Thus, we view the door to still be open for more downside and consider the anticipated serious challenge of $2.543 to still be very much in play.

As to the coming week, the NYMEX natural gas futures market is currently resting about 9-cents lower than the previous week at $2.662 after a week where it opened lower at $2.735 and, after recovering back to as high as $2.788, declined through the rest of the week to close weakly and keep our late March decline intact.   With fundamentals still trending bearishly and some additional winter seasonal downside still possible for another week or two, we look for some additional follow through downside in the coming week.  We would note that at $2.662, it is now resting just 12-cents from our February 15th seasonal low point and consider a serious challenge of this low as being possible in the coming week.  As to all factors affecting natural gas futures, please see summary box on page 2.

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