Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
You can access all of our platforms from a single Saxo account.
Natural Gas surge increasingly at risk of reversing
Ole Hansen
Head of Commodity Strategy
Summary: An early cold snap has left residents of the US northeast shivering and sent the price of natural gas way higher. But forecasters say the big chill won't last much longer, and neither should the inflated prices.
Natural gas has continued its surge higher today, almost reaching $5/term before running into some profit taking. At the current price of $4.63/mmbtu it is up by more than 40% during the past two weeks. It is being carried higher by strong momentum on the combination of unseasonal cold weather across the US northeast raising short-term concerns about production being disrupted due to freezing of the well heads together with stocks lingering at a seasonal 15-year low ahead of the withdrawal season that is about to kick off within the next couple of weeks.
However, once temperatures return to normal the front end of the futures curve could risk a major setback.
However, once temperatures return to normal the front end of the futures curve could risk a major setback.
According to the Tropical Tidbits the cold blast across the US northeast is expected to last at least until November 23 before returning to normal.
The problem with a cold blast so early and well before the peak demand season in January and February has raised concern about the availability of gas in underground storage facilities towards the end of the withdrawal season in late March.
This worry is clearly seen in the spread between the last winter month contract of March-19 and the first spring contract of April-19. Earlier today it reached $1.75/mmbtu before retracing to the current $1.32/mmbtu, still a colossal spread of more than 30% between the two contracts.
This worry is clearly seen in the spread between the last winter month contract of March-19 and the first spring contract of April-19. Earlier today it reached $1.75/mmbtu before retracing to the current $1.32/mmbtu, still a colossal spread of more than 30% between the two contracts.
A year of record production, but also record demand from domestic consumption and rising exports, has left storage levels precariously low with just a few weeks of injections before the withdrawal season begins. The next weekly storage change report is due Thursday at 15:30 GMT and a relatively small injection of 32 bcf is expected.
Latest Market Insights
Quarterly Outlook 2024 Q3
Sandcastle economics
-
-
Bonds: What to do until inflation stabilises
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.
-
Equities: Are we blowing bubbles again
Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.
-
FX: Risk-on currencies to surge against havens
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.
-
Commodities: Energy and grains in focus as metals pause
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.