Arlington, Virginia – January 5, 2017
Headlines flashed across markets last week announcing that natural gas prices had ripped their way to a two-year high as threats of cold-air invasions met an unusually-tight supply/demand balance, completing a 5-day, 20.5% rally into the JAN contract expiry of $3.93. Clearly, this found many market participants surprised, with the vast majority of professional market analysts offering explanation only after the fact.
As early as three weeks before those headlines, EVA had been conveying to its gas-market advisory clients that particulars in the supply/demand balance were pointing to the possibility of a record storage withdrawal for the month of December. EVA’s daily 12/9 early-morning note to clients was headlined “Record DEC Draw on the Radar”.
With two weeks until JAN expiry, EVA’s daily note on 12/16 read “Yesterday’s -147 [withdrawal for gas week 12/8]…along with this week’s [data], illustrate the most threatening supply/demand balance in the U.S. natural gas economy in a decade”.
One week before the JAN contract expiry, in a 12/21 evening commentary, EVA offered clients “If we don’t see [balance loosening]… patience is going to start running very short and we start talking about $4 prompt – perhaps even into JAN expo – because we would then argue that we’d need it” and “we see next week’s JAN bid week is the most important bid week in the 8-year history of the shale era”.
The day before JAN expiry, EVA titled 12/27’s client note “Market Needs to Price JAN Smartly”. In discussing calls for $4 JAN expiry, “We recognize this as aggressive but believe that JAN either sees indexing fixed at prices that forces substantial loosening of the balance or we take a threatening balance into the biggest month of the year for gas” and “Seeing JAN/FEB shed the contango shape that we saw as dangerously mispriced last week, we believe it necessitates another 2c backward from here and believe that’s best seen in a JAN expo towards $4.00 – all of this occurring over the next two sessions”.
As demonstrated in the above excerpts from daily notes sent to clients throughout December, EVA’s Daily Natural Gas Market Advisory Service was highly unique among other market advisory products in positioning clients quite early for what prove one of the most tumultuous supply/demand contexts of the shale era and biggest futures expiries in several years.
As we proceed through the balance of this winter and into the coming summer season, with a supply/demand balance as unique as any in a decade, EVA’s leading Daily Natural Gas Market Advisory service will continue to deliver top-in-class modeling – both of fundamentals and price – and insights to EVA’s broad client set.
Interested in more? Contact Erik Schwartz, Vice President of EVA Marketing, at 703-276-8900 or [email protected] for information on initiating a complimentary trial.