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Price Volatility Looms as NYMEX September Natural Gas Futures Move to Expiry:Following a volatile week of trading, NYMEX...
08/29/2022

Price Volatility Looms as NYMEX September Natural Gas Futures Move to Expiry:
Following a volatile week of trading, NYMEX front-month natural gas futures prices ended last week with a small loss as buyers failed to retest the $10.00/MMBtu seen earlier in the week. At the end of trading on August 26, the NYMEX September 2022 gas futures contract lost 7.9 cents to close at $9.296/MMBtu. On Tuesday, after hitting an intraday high of $10.028/MMBtu for the first time since 2008, prices lost some modest steam over the week amid roller-coaster trading action to finish the week with a tiny 0.5% loss. Today may bring some additional topsy-turvy trading action as the NYMEX September gas futures contract will expire at the end of trading.

The price weakness stemmed from significantly near-term overbought technical indicators and information that the Freeport LNG export terminal would not become operational until at least early-to-mid November, instead early October. Sellers also garnered some additional influence from the weather forecast models showing cool and rainy conditions across the southern tier of the US through at least mid-September.

Over the weekend, some tug-of-war catalysts developed that are likely to create some fights between gas market bulls and bears this week. While cooler temperatures are forecast for Texas and the Gulf coast for the next couple of weeks, the near-term temperature outlook across the northern tier of the US trended warmer during the first week of September, which could produce some upper-80s temperatures in the Midwest and Northeast. However, the gas market bears point to September as the start of the lower demand ‘shoulder season’ when cooling demand starts to fade from the highs.

On the more bullish side of the spectrum, the Calcasieu LNG export facility made some new volume highs, which ran up to 1.7 Bcf/d over the weekend and is presently running at 90% capacity. While this is somewhat bullish news, the early cycle of flows for all LNG feedgas volumes is at around 10.5 Bcf/d as of this morning, even when accounting for Calcasieu gas.

Schedule a free fuel hedging evaluation to stay prepared for the volatility ahead >> https://buff.ly/3NpRTc9.

NYMEX Gas Futures Continue Higher Despite Bearish EIA Storage Data:In keeping with the theme that nothing is bearish in ...
08/26/2022

NYMEX Gas Futures Continue Higher Despite Bearish EIA Storage Data:
In keeping with the theme that nothing is bearish in the natural gas market anymore, the weekly natural gas storage data report showed a storage injection on the larger end of market expectations. Yet, NYMEX gas futures prices still finished the day in positive territory. Upon the release of the storage data, NYMEX front-month natural gas prices ran higher, up to the low-$9.40s/MMBtu. Shortly after that, a bit of logical response finally emerged, and prices sank to an intraday low of $9.175/MMBtu. However, because bearish price responses don’t sit well with the hedge funds dominating the market these days, the NYMEX September 2022 gas futures contract ultimately gained 4.5 cents to close at $9.375/MMBtu at the end of trading on August 25. Today NYMEX gas futures prices are climbing higher to the $9.50s/MMBtu as buyers continue to underpin the market.

In taking a closer look at the weekly gas storage information published by the Energy Information Administration (EIA) for the week ended August 19, the data showed a larger than projected 60 Bcf build, which was 14 Bcf bearish versus the five-year average. Working gas storage increased to 2,579 Bcf. The EIA showed that three out of the five regions saw larger builds, with the South Central region in the forefront, featuring a 5 Bcf injection compared to the five-year average of a 5 Bcf draw. Because Mother Nature doled out some impressively below-average temperatures across this region this week, it will set the stage for an even bigger regional injection in next week’s EIA report. Meanwhile, the Midwest region showed a build of 30 Bcf, which also came in bearish. At the same time, the Pacific Region, coping with heat across the Pacific Northwest during the reflective storage week, produced a 5 Bcf withdrawal. All five regions maintain deficits versus the five-year averages led by the South Central and the East.

At this juncture, it is not out of the question that end of the refill season, natural gas inventories will peak at around 3,500 Bcf. However, suppose dry gas production volumes ramp higher over the next couple of months, and more plentiful wind power generation shows up (as is forecast in the weeks ahead). In that case, this estimate could be revised higher.

Meanwhile, yesterday, the European TTF natural gas price point surged another $8.45 (10% in one session) to close at a new record high of $94.20/MMBtu as gas market players remain concerned about the three-day maintenance-related shutdown of the Nord Stream 1 pipeline that is scheduled for the end of the month. Concerns are that the Russians will purposefully not return the pipeline to service in retaliation for sanctions stemming from the Ukraine-Russia crisis. The exorbitantly high TTF prices come even though European gas storage inventories are at a surplus versus the five-year average and up more than 500 Bcf compared to the same time in 2021. European gas storage for the most part is already sitting at 80% full for a majority of the countries in the region with two months of refill season left to go. Once storage is brimming, potentially in the next 2 to 3 weeks, it would not be out of the question to see a massive sell-off when there is no more room to store any more gas supply.

Delay in Freeport LNG Export Terminal Restart Modestly Sinks NYMEX Gas Futures:Earlier this month, news that the Freepor...
08/24/2022

Delay in Freeport LNG Export Terminal Restart Modestly Sinks NYMEX Gas Futures:
Earlier this month, news that the Freeport LNG export terminal would be coming back online in October buoyed the NYMEX front-month gas futures contract above $8.00/MMBtu before pressing even higher in subsequent days on rickety bullish excuses. Yesterday, there was a revision to the operational date of the Freeport facility, which has now been pushed out until mid-November. This information prompted some modest price weakness, but the response was rather muted. At the end of trading on August 23, the NYMEX September 2022 gas futures contract fell 48.7 cents to close at $9.193/MMBtu. Today, gas futures prices are back in positive territory as buyers are apparently shrugging off the bearish news of the postponed Freeport terminal restart. It is very interesting that a few weeks ago, the news of the Freeport terminal return in October elicited a bullish response that lingered for days. Shortly thereafter, a similar situation occurred when news of the Mars offshore oil and gas platform in the Gulf of Mexico was shut-in due to a leak, which sent NYMEX gas futures prices spiking over $8.50/MMBtu. However, it turned out that the shut-in of the platform lasted for less than 24 hours, yet gas futures didn’t respond in a bearish fashion and kept on climbing.

As it stands, the Freeport LNG facility won’t see volumes return until about mid-November with daily demand not likely to reach 2 Bcf/d until possibly early December. This situation will likely add about another 100 Bcf to gas storage inventories at end of the injection season. As dry gas production continues to grow beyond 98 Bcf/d and the onset of the shoulder period emerges in the weeks ahead, it’s becoming clearer that the end of the refill season is getting ever closer to reaching 3,500 Bcf, which is a comfortable amount of gas storage for even a colder than average winter.

Because there was not a larger bearish response to this news, nor to news of cooler temperatures across the southern tier of the US, or the fact that gas production has reached all-time highs in recent weeks, or the potential for a warmer first half of the looming winter season; it suggests that gas market bulls aren’t ready to throw in the towel yet. After tumbling down to the $5.40s/MMBtu area in the wake Freeport LNG terminal fire in early June, prices have nearly doubled from these lows in less than 2 months to yesterday’s high of $10.028/MMBtu. Gas bulls are still pointing to the storage deficit of around 300 Bcf versus the five-year average as the reason to underpin prices and overall momentum continues to be with the gas bulls despite all of the bearish drivers in the market. This suggests that there could still be more attempts of buyers to retest the $10.00/MMBtu area.

Over in the oil futures market, NYMEX oil futures garnered some strength yesterday after rumors circulated that OPEC would consider production cuts should an Iranian nuclear deal be reached. At the end of trading, NYMEX October 2022 WTI oil futures gained $3.38 to close at $93.74/bbl. Today, the Department of Energy (DOE) will publish its weekly Petroleum Status Report for the week ended August 19, which highlights crude oil and refined product inventories as well as supply/demand data. The American Petroleum Institute (API) is projecting a 5.6 MMbbl crude oil drawdown, which would be 1.7 MMbbls bullish versus the five-year average. Should it verify, crude oil inventories would decline to 419.4 MMbbls, while the storage deficit versus the five-year average will widen to 30.6 MMbbls. The API is projecting gasoline inventories to rise by 0.3 MMbbls, which would be 1.6 MMbbls bearish versus the five-year average. Distillates are also anticipated to rise by 1.1 MMbbls, which would be slightly bullish compared to the five-year average.

08/23/2022

NYMEX Gas Futures Top $10.00/MMBtu in Sympathy with Surging European Gas Prices:
The current price strength with NYMEX front-month gas futures shouldn’t be happening. What is being witnessed is purely a speculative play that isn’t steeped in the reality of the real underlying supply/demand fundamentals. However, because the market is being dominated by deep-pocketed hedge funds that are bent on running prices higher with any available excuse, there’s very little that can be done to counter the current bull run unless another large fund (or funds) decides to dive in and attempt to take the market the other direction.

At the end of trading on August 22, the NYMEX September 2022 natural gas futures contract gained 34.4 cents to close at $9.68/MMBtu, marking the highest close since early July 2008. Today, during overnight electronic trading, NYMEX front-month gas futures hit a high of $10.01/MMBtu, setting the tone for what will likely be another bullish trading session. Gas market bulls are hanging their hats on at least a few drivers. One of them is continued US pipeline maintenance with daily dry gas production wobbling just over 97 Bcf/d instead of pressing back above the recent highs north of 98 Bcf/d. However, once the seasonal calendar presses deeper into the lower demand ‘shoulder period’ for the entirety of the nation, dry gas production will likely not only resume above 98 Bcf/d, but there are good indications that production could test or exceed 99 Bcf/d before the end of 2022.

Meanwhile, temperatures across the near entirety of the southern tier of the US, also known as the air-conditioning belt of the nation, are simply not bullish for NYMEX gas futures prices as most of the region is seeing daytime highs that are upwards of 15 degrees below-average. This includes Houston and Dallas, Texas, in the low to mid- 80s, New Orleans, LA, in the mid-80s, Little Rock, Arkansas, near 80 degrees; and Jackson, Mississippi, only in the upper 70s. These kinds of temperatures are reminiscent of early Fall like temperatures instead of late August conditions. The longer-range models suggest that the peak heat of the 2022 summer is now in the rear-view mirror. There’s no doubt that NYMEX gas futures prices are overvalued at the current price levels. It will be a factor behind more US inflation as countless products are tied to natural gas costs. While dry gas production is hovering near 97 Bcf/d amid pipeline maintenance, it is still up about 4 Bcf/d year-over-year, which isn’t bullish but is being construed to be. Until dry gas production volumes return to all-time highs above 98 Bcf/d, cooler weather emerges across the nation, and US gas storage inventories look to reach 3,500 Bcf, buyers will likely remain in control. However, once all of these bearish catalysts combine forces, there will likely be a major correction to the downside, with prices cascading back well below $6.00/MMBtu later this year.

Gas Futures Rise Amid Production Maintenance, Climbing European LNG Prices:After a topsy-turvy week for NYMEX front-mont...
08/22/2022

Gas Futures Rise Amid Production Maintenance, Climbing European LNG Prices:
After a topsy-turvy week for NYMEX front-month natural gas futures, prices ultimately finished the week in positive territory. At the end of trading on August 19, the NYMEX September 2022 gas futures contract gained 14.8 cents to close at $9.336/MMBtu and was up 6.5% for the week, marking its second consecutive weekly gain. Gas market bulls are already back in play to start the new week, with prices trading in the upper $9.90s/MMBtu amid the same drivers as last week, which surround the fluctuations in daily dry gas production volumes.

Some are attributing the spike in prices to surging European gas prices. However, the strength in NYMEX gas futures related to European gas prices doesn’t make much sense because the US has limited LNG export capacity. The US can’t send out more LNG supply beyond current capacity, therefore, whatever gas prices are doing abroad shouldn’t have much bearing on NYMEX gas futures. But in this current market atmosphere where the fundamentals are being ignored, almost anything goes as an excuse to run NYMEX gas futures prices higher.

Other than last week’s support weekly gas storage data, the upside action in NYMEX front-month natural gas continues to be influenced by somewhat flimsy concerns about dry gas production, which declined as low as 96 Bcf/d early last week and then remained well below the 98.5 Bcf/d record high from the prior week with volumes wobbling around 97 Bcf/d areas. Over the weekend, volumes rose to 97.8 Bcf/d, which gas market bulls are viewing as price-supportive even though this is the typical time of year when maintenance events become more frequent in preparation for the coming winter season. Even greater volumes of dry gas production will be forthcoming once the maintenance subsidies rise to 99 Bcf/d or higher. But this is being shrugged off by buyers, who are likely hedge funds are gunning for higher trajectories.

Interestingly enough, NYMEX gas futures prices are climbing higher this week despite the near-term temperature outlook being downright bearish by late August standards. After a mild weekend with daily storage injections, which rose above 10 Bcf/d, temperatures are poised to moderate even more over the next week, influencing forecast gas-weighted degree days (GWDDs) back above long-term averages. In fact, the period of August 22 to September 4 is likely to produce the third-fewest GWDDs for the period in the last five years.

These cooler temperatures are slated to overspread of the southern tier of the nation from Texas to the Atlantic coast, which will see highs that are as much as 15 degrees below average, significantly mitigating cooling demand. This includes Dallas, Texas near 80 degrees and Oklahoma City in the lower 80s to Jackson, Mississippi, and Atlanta, Georgia near 80 degrees. The Northeast and mid-Atlantic will be more moderate in its anomalies with highs around 5 degrees below average, including Columbus, Ohio in the upper 70s, Philadelphia near 80 degrees, and Raleigh, North Carolina in the lower 80s. As such, the storage deficit versus the five-year average could begin to decline over the next 2-3 weeks, which could act as a challenge for gas market bulls to keep prices underpinned.

Presently, NYMEX gas futures are overvalued at their current 14-year highs. Even with dry gas production failing to climb to new highs amid ongoing maintenance and some concerns over storage adequacy entering the winter withdrawal season, $9.00/MMBtu natural gas is a stretch based on current fundamentals. However, until the bearish underlying fundamentals become so loud that they can’t be ignored any longer, the NYMEX gas futures will likely remain underpinned. Once seasonally low demand temperatures emerge across the bulk of the US and dry gas production remains steadily above 98 Bcf/d, NYMEX front-month gas futures prices should begin to see a sustained decline down toward the $6.00/MMBtu or lower area by late October or early November. In the meantime, it is still possible that NYMEX gas futures could still top $10/MMBtu amid irrational exuberance.

NYMEX Gas Futures See Volatile Trading Session Following Bullish Storage Data:It was a rather bumpy trading session for ...
08/19/2022

NYMEX Gas Futures See Volatile Trading Session Following Bullish Storage Data:
It was a rather bumpy trading session for NYMEX front-month natural gas futures on Thursday following the release of the weekly gas storage data report, which came in rather bullish relative to market expectations. Immediately following the release of the storage information, NYMEX gas futures ran to a high of $9.663/MMBtu before pulling back on profit-taking. Prices bottomed out at $8.913/MMBtu before rebounding into positive territory again in the afternoon. However, sellers returned near the end of trading on August 18, and the NYMEX September 2020 gas futures contract lost 5.6 cents to close at $9.188/MMBtu. Today, gas futures prices are drifting lower as cooler temperatures are in the forecast for the southern tier of the US. There are solid indications that the most intense summer heat is now in the rearview mirror. The Energy Information Administration (EIA) reported an 18 Bcf storage build for the week ended August 12, bringing working gas in storage to 2,519 Bcf. The EIA information showed that inventories were 296 Bcf less than last year and 367 Bcf below the five-year average of 2,886 Bcf. Market prognostications ranged from a storage build of as little as 14 Bcf to as much as 38 Bcf, with many estimates focused on the 20s/Bcf.

The storage data revealed the two regions that saw the most notable weekly storage withdrawals: South Central, which featured an 8 Bcf draw compared to its five-year average of a 1 Bcf pull. Also, the Pacific region had a 4 Bcf draw, which was weighed against its five-year average of a 0 Bcf withdrawal. Interestingly, the East region, which had the hottest weather in the US (relative to the averages) during the reflective storage week, featured a 7 Bcf build. Meanwhile, the Mountain Region saw a bearish injection of 3 Bcf. All five regions continue to have deficits versus last year and their respective five-year averages. South Central continues to be the front-runner with a 140 Bcf deficit versus the five-year average and a 117 Bcf deficit compared to 2021. Early-bird gas storage ‘market estimates for the week ending August 19 are for a storage build ranging from as little as 53 Bcf to as much as 62 Bcf. The larger projected storage build was influenced by a rather widespread cooldown in temperatures throughout major metropolitan areas of the eastern 50% of the US, along with a looser supply/demand imbalance as dry gas production volumes continue to oscillate on either side of 98 Bcf/d. The last couple of days of data, confirmed by volume, show that changes are happening here and now. Some of the latest dry gas production data suggest that volumes have ramped up to around 98.7 Bcf/d as of this morning. Once the Northeast begins ramping up production when heating degree days (HDDs) begin to gain traction, there's a very good likelihood that 100 Bcf/d may be here much sooner than the market is realizing.

The price weakness that followed the release of the storage data stemmed from the fact that the market had already priced in a smallish gas storage build. Therefore, profit-capturing was a knee-jerk reaction to the storage data that was rather expected. Also, prices are overvalued and technically overbought, so sellers attempted to lower prices after the initial jaunt higher.

However, some limited buying action emerged in the afternoon amid regurgitated news about the Freeport LNG export terminal coming back online in mid-October. Apparently, this time around, the same old news didn’t garner much buyer interest.

NYMEX Futures Trade Sideways:NYMEX front-month natural gas futures closed at fresh 2022 highs during midweek trading as ...
08/18/2022

NYMEX Futures Trade Sideways:
NYMEX front-month natural gas futures closed at fresh 2022 highs during midweek trading as prices crested at $9.677/MMBtu on Wednesday as speculators added more long positions despite conflicting bearish fundamentals in the marketplace. However, some minor profit-taking emerged in the afternoon, and prices ended the day in negative territory. At the end of trading on August 17, the NYMEX September gas futures contract lost 8.5 cents to close at $9.244/MMBtu. Today, gas market players will focus on the weekly gas storage data, which will act as a barometer on the underlying supply/demand fundamentals.

Presently, NYMEX front-month natural gas prices are significantly overvalued not only from a fundamental perspective but from a technical viewpoint as well. The price strength has little to do with the true supply/demand imbalance. It is chiefly influenced by hedge fund-induced speculative trading action chasing higher prices due to multiple thousands of deeply out-of-the-money call options purchased earlier this Spring and Summer when prices were less than half of what they are currently.

Meanwhile, there seems to be a recurring theme among news media that daily maintenance-influenced fluctuations in record high dry gas production, temporarily wobbling below 98 Bcf/d during the work week, are a factor in underpinning gas futures prices. There’s a distinct likelihood that dry gas production volumes will continue to climb toward 99 Bcf/d or higher by the wintertime. It would seem logical that NYMEX gas futures will trade notably lower later this Summer and into the Fall, especially if production can climb and stay above 98 Bcf/d. But again, this thesis was also said to be the case back in May and June about production rising to 97.5 Bcf/d.

Another key observation is that one week ago today, NYMEX gas futures shot higher amid news of an offshore pipeline leak resulting in the shuttering of some gas Gulf of Mexico gas supply. The shut-in information spread quickly across the market and caused gas futures prices to vault higher above the $8.60/MMBtu area. This was a non-event rectified within about 18 hours, but NYMEX gas prices didn’t decline to their former lower levels. This morning, the Energy Information Administration (EIA) will publish its weekly natural gas storage data report for the week ended August 12. Market estimates are for a wide-ranging storage build from as little as 19 Bcf to as much as 45 Bcf. We are projecting a 26 Bcf storage build. The smallish build resulted from a significant dip in wind power generation over the reflective storage week.

In terms of how NYMEX front-month gas futures might respond to the outcome of the storage data, a build of less than 21 Bcf will likely be construed as bullish and could send NYMEX futures up toward the $9.70s/MMBtu or higher.

Gas Market Players Perplexed as NYMEX Gas Futures Surge to New 2022 Highs:With very little in the way of bullish influen...
08/17/2022

Gas Market Players Perplexed as NYMEX Gas Futures Surge to New 2022 Highs:
With very little in the way of bullish influencers leading prices higher, NYMEX front-month gas futures managed to surge to new 14-year highs on Tuesday, leaving many gas market players and participants confused, befuddled, and frustrated. This was particularly the case for many commercial and industrial end-users across the US who are already coping with exorbitantly high prices. After spiking to an intraday high of $9.411/MMBtu, at the end of trading on August 16, the NYMEX September gas futures contract gained 60.1 cents to close at $9.329/MMBtu. Compared to the early June lows when NYMEX gas futures tumbled to the $5.40s/MMBtu, following news of the Freeport LNG export terminal outage, prices are now up an eye-opening 72%. As of this morning, NYMEX front-month gas futures are pressing even higher. As with the last few upside trading sessions, the energy news media blamed yesterday’s price strength on fluctuating dry gas production volumes.

The current fundamentals do not support $9.40/MMBtu gas futures or $8.00/MMBtu, or even $7.50/MMBtu gas prices. Prices are off the rails and overvalued at current levels. Even with maintenance occurring, it’s clear that dry gas production, which is already up 4-5 Bcf/d year-over-year, is poised to advance higher into the Fall, potentially testing 99 Bcf/d by the end of the year. Meanwhile, LNG exports are unchanged year-over-year, and the Freeport LNG export facility isn’t scheduled to return to service until roughly mid-October. Hurricane season is lighting up, which could bring demand destruction in weeks. Yes, gas storage inventories are presently on the lower end of the spectrum. Still, it is only mid-August, and multiple bearish catalysts are already set into motion to help storage reach 3,500 Bcf, which will be adequate supply during a colder-than-average winter. Should the first half of the winter come in warmer than normal, as some of the longer-range models have been suggesting for weeks, it adds even more bearishness to the overall outlook.

We have a hunch that the current bullish exuberance in NYMEX gas futures prices has more to do with hedge funds gunning for enormous quantities of call options with strikes between $8.50/MMBtu and $10.00/MMBtu, which were executed when prices were 50% lower than they are now back in the Spring and early Summer. Current prices are not sustainable and inflict economic damage and pain to the demand base. With that said, momentum continues to be with the bulls, particularly if the upside is largely controlled by deep-pocketed hedge funds that have no regard for the underlying fundamentals and are simply going to lower the market – because they can. At some point, there will be a dramatic sell-off that will send prices plummeting, but knowing when the sell-off will occur is anybody’s guess. .

Why do NYMEX Natural Gas Market Bulls Continue to Ignore Bearish Drivers?A week ago, on Monday, August 8, NYMEX front-mo...
08/16/2022

Why do NYMEX Natural Gas Market Bulls Continue to Ignore Bearish Drivers?
A week ago, on Monday, August 8, NYMEX front-month natural gas futures were trading in the upper-$7.50s/MMBtu amid fundamentals that are gaining increasingly bearish traction. Fast-forward to yesterday, Monday, August 15, and NYMEX September natural gas futures climbed to an intraday high of $8.936/MMBtu before closing at $8.728/MMBtu, down 4 cents on the day. Even though current near-term and longer-term fundamentals are even more bearish than they were a week ago, somehow, NYMEX gas futures are trading nearly $1.60/MMBtu higher compared to last week. As of this morning, NYMEX front-month gas futures are up nearly 6% trading in the $9.20s/MMBtu. So what gives? Most market participants can provide the news-generated ‘excuses du jour’ for the supposed reasons why NYMEX gas futures are so bullish, such as skyrocketing global LNG prices are influencing NYMEX gas futures higher and record high dry gas production (wobbling around 98 Bcf/d) have a tendency to pull back during the work week amid maintenance operations. But these reasons do not really justify ‘September’ natural gas that is priced in the $8.70s/MMBtu. After all, the month of September resides during the lower demand shoulder period between the summer and winter seasons, which is typically not very bullish for gas consumption. Presently, record high dry gas production is sitting at roughly 5 Bcf/d higher than this time last year, which isn’t bullish. Plus, there is solid evidence that dry gas production volumes may continue to climb up to 99 Bcf/d or more by the end of the year, also not bullish.

Meanwhile, the three-week temperature forecast for the near entirety of the southern tier of the US (where all the hefty cooling degree days are concentrated) is showing unusually below-average temperatures. Once again, not bullish. The last few weekly storage builds have come in larger than expected and the gas storage injections over the next several weeks will likely come in larger as well, which is not bullish.

As natural gas prices have remained so elevated for most of the year, these economic conditions have historically resulted in high-priced demand destruction, which is already being seen across many industries. This is not bullish. Also, recently tumbling NYMEX WTI oil futures typically isn’t considered bullish for natural gas futures either.

The tropical season is lighting up with multiple tropical waves in the forecast coming off of Africa, which increases the chances of weather-related demand destruction from the potential for widespread power outages in the US and threatens Gulf Coast LNG export facilities. Not bullish.

Looking ahead, there are already indications from the longer-range weather forecast models that the first half of the 2022-23 winter may come in warmer than normal. Lastly, NYMEX gas futures are extremely overbought from a near-term and longer-term technical perspective, both of which are not bullish.

08/15/2022

NYMEX Gas Futures Seek Lower Territory Amid Bevy of Bearish Drivers:
After seeing three days of impressive gains last week amid rather unsubstantial drivers, NYMEX front-month gas futures finally lost steam at the end of the week. At the end of trading on August 12, the NYMEX September 2022 gas futures contract fell 10.6 cents to close at $8.768/MMBtu. However, because of the stout gains earlier in the week, prices rose by 8% for the week. Today, prices are drifting lower to start the week amid several bearish catalysts, including notably overbought technical conditions, forecasts for below-average temperatures across most of the southern tier of the US for August, and tumbling crude oil prices, as well as other bearish price-setting mechanisms. While there is some news media reporting a continuation of hot temperatures across the US, this isn’t being reflected in the major weather forecast models, particularly across the near entirety of the South, which is the area of the US where summer-time weather demand counts the most when it comes to Gas Weighted Degree Days (GWDDs). In fact, as depicted by the European (ECMWF) model, the core of summer in the South is done as temperatures will be normal to below normal throughout much of the region for the next three weeks. Above-average temperatures will be seen across the northern tier of the country. Still, due to the geographic location of the warmth and the seasonality of late August, the northern region of the nation shouldn’t have a significant influence in overall demand. Even the early morning run of the Global Forecast System (GFS) is buying into the cooler outlook of the ECMWF model.

When it comes to the underlying supply/demand fundamentals, dry natural gas production hit a record high of 98.5 Bcf/d on Monday, August 6, before eroding down toward 97 Bcf/d amid pipeline maintenance operations. Over the weekend, as expected, production volumes climbed back above 98 Bcf/d on Sunday, which is below all-time highs, but up roughly 5 Bcf/d versus 2021. But because volumes are pulling back amid maintenance, gas market bulls are taking this as bearish. Go figure? Evidently, gas market bulls want production to remain steadily above 98 Bcf/d in order to respond to it.

Even with a barrage of bearish influencers staring the face market in the face, it appears that gas market bulls (likely a handful of deep-pocketed hedge funds) continue to dominate the market. It’s not out of the question that prices could retest the $8.75/MMBtu to $9.00/MMBtu area in the relatively near term. On the downside, if sellers finally step in, the first level of major support resides near $7.50/MMBtu followed by $7.00/MMBtu. As the fundamentals continue to become more heavily weighted toward the looser side of the spectrum, it’s still very likely that NYMEX front-month gas futures could see a return to the sub-$6.00/MMBtu once the gas market bulls decide to ring the register and take profits.

Schedule a free fuel hedging evaluation to stay prepared for the volatility ahead >> https://buff.ly/3NpRTc9.

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