Happy Tuesday
Hope you had lots of good family time over the Thanksgiving weekend.
The US market was open yesterday and natural gas on the NYMEX sold off hard. November front month contract sold off 14 cents to $2.49 US/mm. The contract settled near the August and September contract lows. However, the contract bounced back today. I think we need to give it a few more days before we will know if this support will be solid or if the contract will continue down. Despite jumping around today, the close is $2.488 US/mm, only a slight change from yesterday. Chart from TradingView:
The winter strip sold off 11 cents yesterday to $2.91 breaking beneath the August and September lows. It traded a bit up today but is still below that level. This would indicate to me that traders are becoming more confident that there will be enough gas for this winter in storage.
Next summer was down yesterday 6 cents to $3.045, which is above the August and September lows. This makes sense to me in that we don’t have a good idea yet what the fundamentals situation will be next summer, so traders will be cautious.
What to make of all this? The sell off makes sense as storage is getting full and the moderate weather makes for low natural gas demand. The bounce back is normal as markets rarely move in a straight line and usually have a retracement against the trend. The key for me is that the NYMEX-Dawn basis is getting tighter because as NYMEX is selling off, Dawn is holding in tough as they cram the last bit of gas into storage. I am watching to see what happens when Dawn and Tecumseh storages gets full.
The weather is looking to be colder than average for the next few days, but is forecast to be warmer than average for the second half of October (i.e. less natural gas demand).
In the Atlantic, there is another invest with a 60% chance of getting organized into a cyclone in the next week. This system is east of Puerto Rico. There is another system off the coasts of Nicaragua and Honduras with a 30% chance of getting organized. Stay tuned.