Nat Gas midweek Recap: 3/5/25 Trump trumps the fundamentals!
Wow!!! What a week. I stayed up late Sunday night to see the early model runs print, which printed back to the colder, Weekend model ideas, to close my puts. I woke up seven hours later to a rally in NG back to the 3900 level from 3770! But knowing that the Trump tariffs were to take place yesterday, my belief was that there would be a great deal of speculative panic in the market. Which can go either way! I did sit out Monday to gauge the market to see what could possibly be moving such a move. After the midday models printed back to a bit of a warmer solution, I knew that a short squeeze was on after price spiked for the day. I did take a short position after the run up Tuesday after the price had spiked and was beginning the first of many rollercoaster rides! I did not close any of my positions out due to the price not hitting my 4150-418 target today, but my belief is that this is a short covering rally due to overall uncertainty. My belief is still that the third week of this month will begin to consistently print cold into mid-April. Knowing that there is now a new upper price target above 4500, this looks very, very promising. But this has been a great trading week if you are able to get on the right side of the trades, but for me, I can wait until the big speculators take some big profits this week. I am still waiting for my target back down to below the 4150-4180 to exit my short and renter a long for the coming cold.
Heating demand had little to do with buying this week, as the 15-day U.S. and European outlooks trended warmer Sunday night and a bit cooler today. Both with a large jump in daily prices. This week’s large price swings reflect an uncertainty among investors about as they contemplate many inputs, including tariffs, geopolitical tensions, uncertain weather forecasts, consistent storage deficits. The large gains earlier in the week and in the mid-day New York today have primarily been due to short coverage, from the remaining shorts in the market. Coming into this week, natural gas speculators were less short than they have been in almost a year. This tells me that we are probably short-squeezing the remaining positions. There was news on the online industry forum Enelyst that today’s giant spike was due to a large fund liquidation due to a margin call from Monday and Tuesday’s large price move. The curse of the margin!
U.S. markets appear to be shocked by the real enactment of tariffs, as many investors had priced in some amount of skepticism due to Trump’s delay of tariffs earlier in February. Trump did follow through with his 10% tax on Canadian oil and gas, with Canada stating it intends to enact retaliatory tariffs in 21 days if they are not removed. Despite an estimated 1.3 Bcf/d drop in Lower 48 gas production due largely to pipeline maintenance events, Wood Mackenzie estimated that pipeline imports from Canada plunged to 4.5 Bcf/d Tuesday from 6.2 Bcf/d Monday as the import levies took effect. Since Canadian imports account for a relatively minor share of the larger U.S. market, Industry experts posted “tariffs alone are unlikely to cause significant increases in price, especially at the Henry Hub,” the G&A team said. “We expect natural gas’s price movement for today and the past couple of days to be based on non-fundamental dynamics in large funds covering short positions after initial movement on trade war fears.”
However, “the near-term situation only tells part of the story,” said Pinebrook Energy Advisors’ Andy Huenefeld, managing partner. “The market appears to be shifting to panic mode due to the massive storage deficit against a backdrop of underlying fundamental market risks.
“With inventories set to exit the winter at a deficit of more than 700 Bcf to year-ago levels, the market is staring at an uphill battle to bring stocks back to healthy levels heading into next winter.” He added, “If inventories were to grow at the same rate as last summer, from an expected bottom near 1.5 Tcf, stocks would top out in October at less than 3.2 Tcf. This would be dangerously low heading into an uncertain winter and an extremely bullish development for the U.S. market.” Huenefeld also noted that “demand for LNG could easily be as much as 2.5 Bcf/d higher than year-ago levels throughout the summer.” Higher gas prices should coax producers to increase output. However, a shrinking coal-fired power fleet and growing intermittent renewable generation could limit the potential for price-induced demand destruction in the power sector, he said.
As for the heating demand outlook in North America, midday weather data “maintained a couple chilly weather systems sweeping across the northern and eastern U.S. late this week through early next week with lows of 0s to 20s for stronger national demand,” NatGasWeather said. “This includes the southern U.S. cooling several degrees as well.” Models showed the March 11-16 period as “not nearly cold enough to intimidate,” the forecaster added. The data favored “a closer to seasonal U.S. pattern March 17-20 as temperatures become near normal over most of the U.S., although quite far out in time and where changes are likely.”
Wood Mackenzie estimated U.S. LNG feed gas flows at 15.3 Bcf/d Wednesday, versus the recent seven-day average of 15.3 Bcf/d. Dutch Title Transfer Facility prompt month futures fell 13% this week. After the European benchmark surged on Monday in the wake of a contentious meeting between President Trump and Ukrainian President Volodymyr Zelenskyy.
Wow this all makes no sense!!!! Bullish new, bearish news, what to do!!!!!
The overall market trend is in a bullish state. But do not let the emotional side of the past few days let you forget that the fundamental picture will come back into view eventually. Tomorrow’s EIA report should come in somewhere around normal for the time period. Trump again is back peddling on his tariff threats, look at the second 30 day hold on the car companies and now ag sector announced later today. Continue to enjoy these wild daily swings and hop onboard the price swings. But remember Friday is coming and there are profits to close out for the week on the 70 cent move this week. I am committed to holding my puts entered at the peak Monday until the price settles down to the 4150-4180 level. I will stay disciplined and follow my path and not let others emotional appeals and move sway my plan. Reenter and let the weather turn, where there will be no talk of any warming in the models, or a possibility of the withdrawal season being over. We are almost there, then it is time for Round two, the shoulder season.
Keep it burning!
