Hey guys,
I don’t think there’s been a time like this where I’ve had to consider so many different events and affects for Natgas. Here is how I see the below.
1) Storage, the market is holding on high because they believe that Storage won’t recover. However, the projections we have show that the -220bcf deficit will be recovered to around -120bcf by the end of March.
Production is set to continue increasing, and the export terminals are set to start shutting down soon. Both factors that are bearish for NG.
I see the deficit being wiped out come the end of April, that implies a price of around $2.8 to $3, if it plays out that way.
2) External supply pressure. There has been geopolitical considerations lately.
Russia / Ukraine peace could be on the horizon. We should know over the next 48 hours what Russia will do.
If Russia agrees, that’ll take supply concerns away from Europe and should be a strong bearish factor for the US.
Same goes for Canada, there’s some concern about Canada cutting off their supply. We all know that’s not likely, but until that relationship is recovered, the worry will stay.
3) Weather, the next 10 EIA reports are all extremely bearish, especially the next 5 reports.
We’re set to start injecting Natgas 3 weeks earlier than usual.
The worry about the Polar Vortex collapse hasn’t appear in any models yet, and in fact, the models are much warmer and more spring like. Which is positive.
Obviously each of these points, has the potential to change and be a bullish factor.
Russia might not want peace, the Polar Vortex might collapse and send the weather colder, Canada might cut off exports.
Be nimble and protect yourself.
I expect we’ll see the market start pricing the bearish EIA reports very soon. I suspect the big guys are taking positions whilst retail try and aim for $5.
$4.5 is very strong resistance.
I expect price will retest at least $3.5, but if we see peace in Europe etc, that could change to $3 or $2.8.
Data should start mattering more and more as we get closer to these pivotal events. Good luck!