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Hot Take: Natural gas prices do not coorelate with temp
Posted on 1/16/24 at 11:30 pm
Posted on 1/16/24 at 11:30 pm
Nat Gas is $2.70 right now. A -$0.60 dip from a week ago despite the entire contry being below 25 wind chill with most below 5 wind chill.
May 2022. The most mild temperature month with no extreme highs or lows set a record at that point for highest nat gas price for a month for over a decade at $8.20 an mcf on average for whole month.
I see on stocktwits or other forums people say "cold front is coming in. I'm going to buy SWN or EQT now bc it'll go up".
If you look at a monthly graph of nat gas prices over last 20 years, you'll find little to no coorelation with temperature.
May 2022. The most mild temperature month with no extreme highs or lows set a record at that point for highest nat gas price for a month for over a decade at $8.20 an mcf on average for whole month.
I see on stocktwits or other forums people say "cold front is coming in. I'm going to buy SWN or EQT now bc it'll go up".
If you look at a monthly graph of nat gas prices over last 20 years, you'll find little to no coorelation with temperature.
This post was edited on 1/16/24 at 11:31 pm
8
Posted on 1/17/24 at 12:30 am to Saunson69
Winter natural gas prices correlate with the long range forecast more than the current weather.
Also, keep in mind that you’re rarely seeing a quote for spot NG. It’s almost always a future contract that understandably won’t correlate with current temps.
Lastly, the above explains why you’re wrong. NG spot prices hit their highest price since 2021 today. Spot prices spiked over 300% since Thursday to over $13.
Also, keep in mind that you’re rarely seeing a quote for spot NG. It’s almost always a future contract that understandably won’t correlate with current temps.
Lastly, the above explains why you’re wrong. NG spot prices hit their highest price since 2021 today. Spot prices spiked over 300% since Thursday to over $13.
Posted on 1/17/24 at 8:30 am to Saunson69
quote:
Natural gas prices do not coorelate with current temp
Long range models do drive the price somewhat, but everyone with a brain knows that is cyclical. Power companies typically store large reserves of natural gas in preparation of high demand months. But that is months ahead of any of these types of events
Posted on 1/17/24 at 9:35 am to Saunson69
quote:
I see on stocktwits or other forums people say "cold front is coming in. I'm going to buy SWN or EQT now bc it'll go up".
There’s a reason that nat gas trading is called “the widow maker”.
Posted on 1/17/24 at 1:40 pm to Saunson69
It is very local. During the Uri freeze in TX (2021) spot prices got out up to $200/mcf at the Katy and HSC hubs. For this particular freeze those same hubs were up to $8/mcf for maybe a day. I would think you see the same up in the Marcellus, but I'm not as familiar with that market.
Posted on 1/17/24 at 5:26 pm to Jag_Warrior
quote:
There’s a reason that nat gas trading is called “the widow maker”.
Got my arse burned many many years ago trading 3x leveraged nat gas ETFs. Carried forward losses for nearly a decade.
Ultimately, OP is kinda right in that you can’t just buy nat gas going into the winter because it will be cold. That’s already priced into futures contracts.
Posted on 1/17/24 at 6:57 pm to slackster
I’ve felt your pain. I played with UNG short options a few years ago. I fell for the lure of that sweet high IV. Then I learned that in the case of nat gas related underlyings, IV isn’t really understated, as tends to be the case with most other securities. 
So I don’t do dat no mo!
So I don’t do dat no mo!
Posted on 1/18/24 at 8:00 am to slackster
Oh we all learned. The biggest driving factor is storage.
Posted on 1/18/24 at 4:08 pm to Saunson69
Here is how it usually works…I am an old pro:
When I position for higher natural gas prices, they go lower.
When I position for lower natural gas prices, they go higher.
I have lost fortunes in natural gas. Don’t be like me.
When I position for higher natural gas prices, they go lower.
When I position for lower natural gas prices, they go higher.
I have lost fortunes in natural gas. Don’t be like me.
Posted on 1/18/24 at 4:10 pm to slackster
quote:
many years ago trading 3x leveraged nat gas ETFs
A 3x leveraged holding saved my rear end once in natural gas. Only positive thing about it. The rest of the times, fees and market took my money.
Posted on 2/23/24 at 6:51 am to PeterBiechner
I am wondering with it being so low if it is worth buying some and holding for a spike.
Posted on 2/23/24 at 9:25 am to GREENHEAD22
im going to guess when Trump gets in it will take a spike.
Posted on 2/25/24 at 2:17 pm to Saunson69
temperature very much matters for gas pricing, but a 3 day cold spell does very little to move pricing when everything else has landed bearish.
-south central storage was above historical norms heading into winter
-lower 48 didn't experience winter
-dry producers have only recently announced any intention of slowing production
-existing lng (particularly freeport) has experienced operational issues
-two new lng facilities have announced delays to first cargo
-end of oct storage will be 4.3 - 4.5 tcf even with an extraordinarily hot summer
-south central storage was above historical norms heading into winter
-lower 48 didn't experience winter
-dry producers have only recently announced any intention of slowing production
-existing lng (particularly freeport) has experienced operational issues
-two new lng facilities have announced delays to first cargo
-end of oct storage will be 4.3 - 4.5 tcf even with an extraordinarily hot summer
Posted on 2/26/24 at 9:37 am to FMtTXtiger
quote:
im going to guess when Trump gets in it will take a spike.
not how any of this works
Posted on 2/26/24 at 10:45 am to Saunson69
quote:
I see on stocktwits or other forums people say "cold front is coming in. I'm going to buy SWN or EQT now bc it'll go up".
EQT is a pure play Marcellus/Utica producer, the basis differential from Henry Hub to Dominion South is around -40%.
Posted on 2/26/24 at 10:46 am to PeterBiechner
quote:
Your observation about natural gas prices and weather patterns is spot on. It's wild how temperature extremes don't always translate to price fluctuations in the natural gas market. Reminds me of a time when I was chatting with a friend who works in the industry. We were discussing how unpredictable it can be. Even during chilly spells, prices don't always follow suit. BTW, I stumbled upon some interesting insights about this on a site called oilandgasinvestmentfunds.com.
I believe extreme, unexpected, weather events do move prices quite a bit but the key word here is unexpected aka not priced in to the future market
Posted on 2/27/24 at 10:36 am to Louie T
prod is down 3-3.5 bcf/d depending on data vendor since 2/15
would help prices tremendously if market consensus for eom-oct wasn't 4+ tcf
would help prices tremendously if market consensus for eom-oct wasn't 4+ tcf
Posted on 2/27/24 at 1:55 pm to Saunson69
Correct..
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