SMC NatGas Weekly Summary
Summary for Week Beginning Jan. 24, 2021
In our last report dated Jan. 17, we noted that the NYMEX natural gas futures market was resting about 4 cents higher than the previous week, at $2.737. That was after a week in which the market opened at $2.60 and then headed sharply higher to $2.899 on Tuesday morning, before running out of steam and drifting back to end the week just below the weekly midpoint.
From a seasonal standpoint, we said that we were three weeks along in our anticipated first upward swing of the January-March winter season. That swing had risen 66 cents thus far, from $2.238 on December 28 to as high as $2.899 on January 12. Looking ahead, we noted that our first upward swing was losing momentum and appeared to be facing exhaustion without additional weather support.
As to how the latest week turned out, weather models flipped bearishly over the weekend and left forecasters giving up on any serious arctic cold until at least mid-February. This had the market opening last week 8½ cents lower, at $2.652. It then dropped notably as it headed to as low as $2.414 just before the Friday EIA storage report. The storage report showed a bullish weekly withdrawal that was 13 Bcfs above expectations. However, with weather forecasts still looking very bearish by Friday, the market failed to rally on the report. It closed the week weakly at $2.446 and pointed lower. From a seasonal standpoint, our first upward swing of the January-March winter season looks to have concluded unless forecasts change, and it can decisively rally back in very short order.
To summarize last week’s market activity, the prompt month natural gas futures contract opened the week 8½-cents lower than where it left off at $2.652 and rose to the high of the week on Tuesday morning at $2.673. It then fell to the low of the week on Friday morning at $2.414 and closed the week about 29 cents lower than the previous week, at $2.446.
- Supportive: sup/dem balance
- Neutral: storage; cash; oil
- Negative: weather; seasonal forces; tech considerations
In last week’s report, we continued to address the specifics of our first upward market swing and noted that, while the bullish evolution in weather mechanisms was continuing as forecast, our first upward swing appeared to be reaching exhaustion at $2.899 and that definite evidence of an actual arctic outbreak for late January and February was likely needed to keep our first upward swing intact.
At this point, last week’s sharp retreat on the news that the MJO weather mechanism would not be situated in a manner to deliver the cold into the U.S. has produced a strong case that our first upward swing concluded on January 12 at $2.899. However, with this year’s odd weather situation, we are not inclined to completely give up on our first upward swing quite yet. Therefore, we will wait another week to be sure that weather forecasts don’t flip-flop again and have our first swing quickly coming back to life in a dramatic fashion.
As to the coming week, the NYMEX natural gas futures market is currently resting about 29 cents lower than the previous week, at $2.446, after a week where the market opened the week about 8 cents lower, at $2.652, and headed lower to a low of $2.414 on Friday morning and a weak weekly close. Looking ahead, if forecasts remain mild, the market looks poised for at least a little more in downside progress into the $2.30s. We’d point out that upcoming, weekly comparisons of year-over-year storage activity should also be conducive to further market downside for the next one to three weeks. Regarding factors affecting natural gas futures, see summary box above.
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