Natural Gas surge increasingly at risk of reversing Natural Gas surge increasingly at risk of reversing Natural Gas surge increasingly at risk of reversing

Natural Gas surge increasingly at risk of reversing

Commodities 6 minutes to read
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. 
Source: Saxo Bank
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. 
Source: TropicalTidbits.com
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.
Natural gas spread between NGH9 and NGJ9
Natural gas spread between NGH9 and NGJ9, source: Bloomberg
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. 

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.