We had a busy day at Bespoke Weather Services today tracking prompt month natural gas prices as they approached a top of their range. We began the day seeing natural gas prices rally even higher following support from cash prices, and prices even briefly ticked above the $3 level for the first time since the 14th. However, as we noted in our Morning Update to subscribers, weather-driven demand risks are extraordinarily bearish in the medium-range with bearish risks holding in long-term and today being the last day over the next couple of weeks where natural gas demand would be significantly above average. This led us to issue a Trade Alert warning just below 8:30 AM that this cash-led rally was likely coming to an end with downside arriving for natural gas prices. 

This Trade Alert ended up verifying well, as prices reversed through the morning as the market continued to price in demand reductions through the next few weeks. Though prices have not quite settled yet, as of 2 PM Eastern this afternoon they look poised to print a rather bearish reversal candle up against the 60-Day Moving Average (though the 30-Day is providing a bit of support). 

"Trader" level subscribers then received a Seasonal Report that looked at forecasts through the next 5 months along with technical analysis of the natural gas curve. In that are our newest charts analyzing natural gas spreads, where we again see that the nearest H/J spread tends to decline this time of year (especially given how wide it currently is). Yet this wideness also seems to indicate that the market is more concerned about walking into the winter season with stockpiles below average than prompt month price action would seem to indicate. 

Along with this came some seasonal trade ideas, end of storage season inventory projections, and seasonal forecasts through the winter season to help natural gas traders hedge weather-related risks or speculate on where the next price movement might be. 

One risk, which we picked up in our Note of the Day, is what will soon be Tropical Storm Harvey, which is seen developing across the western Gulf of Mexico over the next few days. This storm appears quite likely to make landfall in Texas as either a weak tropical storm or potentially a hurricane, bringing with it very heavy rain in the meantime as well. We see in the below National Weather Service model spread graphic that the current spread generally agrees that a Texas landfall somewhere near Houston is most likely, though there remains a decent amount of uncertainty in the track at this time since the storm has not yet re-formed. Still, the National Hurricane Center predicts a 100% chance of tropical development with this system in their most recent 2 PM update. 

Our Note covered any potential impacts of that storm on the natural gas market, looking at onshore and offshore rig placement and various production levels. Thanks to fracking and the shale revolution, far more natural gas production comes from onshore than offshore drilling now, meaning tropical threats in the western Gulf of Mexico likely will not impede production nearly as much as they once did. 

Forecast models do show very impressive rain totals across much of the Texas coastline, which could result in serious flooding if it were to verify and potentially impede some onshore drilling activities as well. However, at the same time we note that the storm will help pull even cooler weather down into Texas with rain and clouds keeping areas further away across the South cooler as well. This comes as a colder pattern will already be sweeping across much of the US. Below we show this morning's American GFS ensemble 2-meter temperature anomaly average across the country on Saturday (courtesy of the Pennsylvania State Electronic Wall Map side) where some of the coldest temperatures to average across the country are seen across Texas. 

The result then will certainly be a reduction in weather-driven demand for natural gas prices already larger than some of the cooler weather that we had previously been expecting, and that comes before we explore the potential for power outages to reduce power demand across the region further. Thus, these storms can have impacts on both the supply and demand side of the equation, with the supply impact not nearly as large as they once were. 

Overall, though, it has been a busy day with a number of weather-driven events between strong heat and humidity in the East yesterday and today, a cool-down nationwide tomorrow that should have significant staying power, and the potential for active tropics in the Gulf of Mexico. Needless to say, natural gas price action will be partially driven by these changing weather conditions even before the first real heating loads arrive.