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Natural Gas Continues Its Decline To Open The Week As US Equities Routed; Natural Gas Inventories To Fall Below 1400 BCF This Evening For The First Time In 4 Years As Demand Rises On East Cooldown; Late Winter Storm Targets Entire I-95 Corridor Tonight & Wednesday

6:00 AM EDT, Tuesday, March 20, 2018
Natural gas slid 4 cents or 1.4% to $2.65/MMBTU on Monday as US markets were once again routed to the tune of -336 points on the Dow and -138 on the Nasdaq. The move lower was likely in association with weak US markets and continued investor anxiety over record production and the upcoming shoulder season as there was no new near-term bearish influence that cropped up over the weekend. If anything, the temperature outlook through early April cooled over the weekend, perhaps prolonging the withdrawal season through the first week of April and pushing season-ending inventories down to near 1320 BCF. Even with lower season-inventories, however, storage injections will likely come fast and furious in April and May as temperatures eventually moderate and year-over-year gains in total supply in excess of 7 BCF/day loosen supply/demand balance. Bearish investors continue to bet that even a -350 BCF storage deficit will not be sufficient cushion heading into the injection season and, right now at least, this sentiment is toppling the bulls. I continue to target the $2.50/MMBTU level as a threshold at which the bearish argument becomes overplayed.

Crude oil, meanwhile, followed natural gas out of the gates by falling over 1%, but caught a tailwind in the afternoon as continued geopolitical tensions in the Middle East, Russia, and Venezuela helped the commodity rally and WTI finished down jus 28 cents or 0.4% at $62.06/barrel. The EIA is scheduled to release its weekly Petroleum Status Report for March 10-16 on Wednesday morning and the American Petroleum Institute will release its forecast for the period after today's close. The 5-year average storage build for the week is a robust +5.1 MMbbl and I am expecting both the API and EIA numbers to come in well below this. My Oil & Natural Gas Portfolio saw an up-and-down day, but managed to squeeze out a +0.1% daily return to push gains since the portfolio's inception on May 1, 2018 to +41.9% and year-to-date gains to +8.4% or +40.1% annualized. As a reminder, subscribers gain access to my realtime portfolio holdings, recent trades and twice-weekly investing commentaries detailing my market outlook and near-term trading strategy on my password-protected Portfolio Page. To learn more about subscribing and helping to support the site, please click HERE.

Today's Forecast Departure From Average High Temperatures

Figure 1: Click here for more information on on the near-term forecast.

Natural gas demand will rebound today as much colder temperatures sweep across the Ohio Valley, Southeast, and Mid-Atlantic as the first wave of a 1-2 winter punch moves across the region. High temperatures will cool some 20F day-over-day from Tennessee and Kentucky eastward to Virginia with 40s and even 30s replacing 60s. Further north, major demand centers from Washington, DC through Baltimore and Philadelphia to New York City will only be in the upper 30s to lower 40s, 10F-20F colder-than-average. Much of this area will see a cold rain today, although higher elevations will see wet snow flakes mixed in as well. However, this is only a taster of the colder, snowier second half of the this storm system. More on that below. Elsewhere, highs today will be seasonally cool across the Plains and northern Midwest with Chicago reaching the mid-40s and Minneapolis the mid-30s, each 5F-10F colder than normal. Overall, thanks to the markedly colder temperatures across the Southeast, today's mean population-weighted nationwide temperature will fall by 2.5F from Monday to 48.4F, 1.9F below-average. Forecast Total Degree Days will rise to 17.6 TDDs today, 2.0 TDDs greater than normal and the 12th most for March 20 in the last 37 years since 1981. Click HERE for more on today's temperature and degree day outlook.

Projected Realtime Natural Gas Inventories

Figure 2: Click here for more information on on natural gas storage.

Based on this forecast and early-cycle pipeline data, I am projecting a -13 BCF/day daily natural gas storage withdrawal, nearly 5 BCF larger than yesterday and 6 BCF bullish versus the 5-year average -7 BCF/day withdrawal. Sometime around 6pm EDT, I project that natural gas inventories will fall below 1400 BCF for the first time since May 25, 2014, nearly 4 years ago. At that point, the storage deficit versus the 5-year average will be -350 BCF, up more than 50 BCF over the last 10 days, while the year-over-year deficit will hold near -675 BCF. Click HERE for more on today's projected daily withdrawal and realtime natural gas inventories.

Latest 48-hour Snowfall Forecast

Figure 3: Click here for more information on on the latest snowfall forecast.

Today's storm system across the Mid-Atlantic will be primarily a moderate-to-heavy rain event with the exception of the mountainous areas of Virginia, West Virginia, and Maryland and the northern fringes including Philadelphia where a slushy inch could fall. While the system will bring much colder air to the region and boost heating demand, from a winter weather standpoint the storm will be relatively low-impact. The same cannot be said about the second phase of this complex system. An area of low pressure will develop overnight tonight across the Carolinas and track to a position just off the Outer Banks of North Carolina by Wednesday morning. On the northwest side of the low, an area of heavy wet snow will extend from the Virginia piedmont north through Washington, DC into Philadelphia. Depending on how far this low tracks offshore, the heavy band of snow could directly impact New York City and Boston as well. March snow storms are notoriously difficult to predict, especially when the majority of the snow is expected to fall during the daytime. Temperatures will be marginal and the late-March sun angle, even with cloudcover, will be intense, making it difficult for snow to accumulate in all but the heaviest bands. Nonetheless, multiple models are forecast a wide swath of 6-12 inches of heavy, wet snow extending across all of the I-95 corridor from Philadelphia to Boston with Washington, DC picking up a solid 4-6 inches, as shown by the Weather Channel's forecast snow totals in the Figure to the right. Winter Storm Watches have been hoisted for all of these areas for Tuesday night into Wednesday night. And after this system, don't put away the snow shovels just yet. Yet another winter storm is possible Friday through Sunday across the Midwest through the Northeast as an active weather pattern continues. Stay tuned. Below-average temperatures ahead of and behind this storm system will continue to support strong natural gas demand and I continue to project a second consecutive bullish weekly storage withdrawal of -72 BCF for March 17-23, 26 BCF larger than the 5-year average, that could take inventories down to 1367 BCF, or -362 BCF larger than the 5-year average.

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