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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
Apologies if this is obvious to everybody, but the underlying fundamental for NG is storage. We inject gas into the ground for 7.5/8 months a year and then withdraw it all in 4/4.5 months. This create's a very interesting dynamic in that if we don't have enough gas in storage to meet demand, Winter prices, and March pricing in particular explode. On the other hand, if we do have enough gas in storage, then the gas that is left in storage at the end of March needs to price as the beginning of next years refill, which means March drops to a discount to April. The extension of this to what a warm winter weather forecast means, should be logical. Of course the risk is the forecast changes.
In New England, when again the snot in my nose is freezing after two inhales after going outside in the morning because the temperature is -10, I'll be wishing I was long in NG. But we'll take a look-see at the NOAA forecast this year, see how they do. I gave up on NG 18 months ago, but it's a fun side-project for me, worth watching in the winter.
Brr, it's going to be cold! Knees and joints, remember?
If you could, would be very helpful for novices like me
Observation 1
i can see that all lines trend up but i guess thats only the difference in price for each contract on that particular day
So the blue line is all the prices on Nov 23rd
This would imply prices keep coming down from the top blue line to the yellow/orange line on 24 Feb 2016
whereas in 2013/14 prices actually moved up (blue line at bottom)
Observation 2
in 2105/16: There is a bigger price differential between z and F and then it flattens out: this will give an indication on spread prices between months
in 2013/14, for 28 Jan 14 and 25 Feb 14, front month prices are higher since it was a cold winter and then a slow rise again whereas in 15/16, front month prices are lower than latter.. as it is now
all great.. one more quick question
is there a good place to see weather predictions to time the purchase of NG?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
Correct. Last winter was a warm winter and prices declined all winter until winter prices were below summer prices. In Winter 13/14 we had a cold winter and winter prices spiked significantly.
Here's another way of looking at the same data. Remember anything below zero incentives people to leave gas in storage.
Large energy traders spend a fortune on weather prediction and normally have their own multi-person weather teams.
An often quoted and reasonable free resource is the governments National Oceanic and Atmospheric Administration ("NOAA") who publish many short and medium range forecasts at Climate Prediction Center - Forecasts & Outlook Maps, Graphs and Tables
