Sign in to follow this  
Followers 0

"Potential Polar Vortex Event" Could Spark Bullish Reversal In NatGas ---- Zero Hedge

Recommended Posts

Meteorologists at private weather forecasting firm BAMWX expect a bullish setup for natgas futures. They say the narrative is flipping from warmer weather to the complete opposite as an Arctic polar vortex could plunge parts of the U.S. into a much colder weather pattern in January than today's currently mild, above-trend temperatures.

"Potential Polar Vortex Event" Could Spark Bullish Reversal In NatGas 

Tyler Durden's Photo
by Tyler Durden
Thursday, Dec 09, 2021 - 09:20 PM

Since mid-October, U.S. natural gas futures have been beaten down 40% as the narrative of colder weather and tight supplies quickly flipped and crushed bullish traders. As the Northern Hemisphere winter is less than two weeks away, new weather models suggest "significantly colder" temperatures could return for parts of the U.S. later this month into early 2022. 

Meteorologists at private weather forecasting firm BAMWX expect a bullish setup for natgas futures. They say the narrative is flipping from warmer weather to the complete opposite as an Arctic polar vortex could plunge parts of the U.S. into a much colder weather pattern in January than today's currently mild, above-trend temperatures.

"Seeing an interesting pattern developing ahead leading up to Christmas and into early January '22, as higher pressure looks to finally re-establish towards Alaska and the North Atlantic, pushing cold from the Arctic down into the US (after a record warm start to the month). If the MJO (Madden-Julian Oscillation) can continue to progress through phase 7 into 8 (and possibly into 1) mid to late December, this can also increase the potential for a Polar Vortex displacement event, sending more consistent cold air deeper into the US…a big risk to watch for the energy markets ahead," Kirk Hinz, the chief meteorologist at BAMWX, noted. 


BAMWX outlines now could be the time to find a long entry into natgas futures, or as they put it, "long UNG," the United States Natural Gas Fund, LP. ETF. Their reasoning behind the play is quite simple: 

Long UNG Equity, Why? Polar Vortex Jan 2022 Northeast - Front-month NG1 40% drawdown in 6 weeks - Things can change on a dime but the setup is very good in our view - When you get a nice - healthy- capitulation puke ahead of this kind of possible shift typically leads to drama reversal - seasonal pattern - GFS (global forecasting system) pointing to an increased probability of Polar Vortex disruptions - decent chance forecasts suddenly get significantly colder to end Dec and open up 2022. Much of the Street got caught very long in Sept, anticipating a brutally cold winter, along with supply risk - then came above ave temps and then the "flush" exit, a now a polar vortex? -BAMWX 


Natgas traders should carefully monitor temperature forecasts and heating degree day estimates for the U.S. to gauge future energy demand. Natgas futures have found support on an upward sloping diagonal trend line. Bloomberg reported earlier this week that traders were buying the dip on the prospects of colder weather later this month. 


Looking across the Atlantic, colder weather and tight supplies sent Dutch natural gas for next month, the European benchmark, over the 100 euro mark and near all-time highs. 


The divergence between U.S. and European energy prices is remarkable and may also suggest a reversal in U.S. natgas is nearing. 


If BAMWX is right, a monster reversal in U.S. natgas futures could be ahead if forecasts pan out.

Share this post

Link to post
Share on other sites

Natural Gas Producers Hit Back At Hypocritical Opponents

By Irina Slav - Dec 09, 2021, 5:00 PM CST

  • The U.S. natural gas industry has come under fire for its rising investment and production, with government officials and others wanting to see renewable investment instead
  • The natural gas industry has responded to these claims by claiming it has the potential to reduce far more emissions far more quickly than renewable energy does
  • The criticism from the government and environmentalists may have a positive effect on the natural gas industry, forcing producers to be as clean as possible

Natural gas, the energy source that was once hailed as the bridge fuel of the future, is now starting to face resistance from certain groups. One Sierra Club official was very clear in labeling new investments in natural gas as a “mistake” and arguing that what was really needed was an investment in renewables and related technologies. As this negative pressure mounts, the natural gas industry is now fighting back.

Earlier this month, Senator Elizabeth Warren sent a letter to almost a dozen oil and gas companies, accusing them of corporate greed and profiteering for exporting record amounts of natural gas instead of keeping it at home to keep prices low.

“The cause of rapidly rising energy prices for consumers and manufacturers is clear: some of the nation’s largest and most profitable oil and gas companies are putting their massive profits, share prices and dividends for investors, and millions of dollars in CEO pay and bonuses ahead of the needs of American consumers and the nation’s recovery from the pandemic,” Sen. Warren wrote, citing reports in the Wall Street Journal about record export rates.

And yet, at the same time, there is often strong opposition to more natural gas use in the United States. New York’s now-former governor Andrew Cuomo, for instance, was a vocal opponent of new gas infrastructure and put a lot of effort into killing a new gas pipeline project, the final blow delivered just last year. At the same time, two years ago, amid a gas crunch, Cuomo threatened New York’s grid operator with the revocation of its license if it didn’t supply enough power for everyone even though the company cited the shortage of pipeline capacity that is required to supply the gas used to make the electricity.

Like with oil, the feeling of some consumers towards natural gas seems to be “We hate you, but we need you”. And like oil, gas producers are making an effort to clean up their image. BP, for instance, recently won A-grade certification for its gas from MiQ, an independent certifier of methane emissions, which, according to its senior advisor Georges Tijbosch, can help both gas producers and regulators by providing the former with a competitive edge if their gas is low-emission and the latter with the necessary information to tighten control over emissions.

It appears that with the growing awareness of emissions, buyers of energy commodities are also becoming more sensitive to their carbon footprint. So, certification and efforts to lower the emission footprint of natural gas production will pay off by making the company’s product more attractive, albeit more expensive, for buyers. 

But some in the industry argue that, even without certification, gas has done a huge amount to help the reduction of emissions by simply replacing coal. In response to Sen. Warren’s letter this month, the chief executive of EQT Energy, Toby Rice, wrote that “The emissions reduction from coal to gas switching seen in the United States between 2005 and 2019 is the equivalent of actually electrifying approximately 190 million cars, or roughly 70% of the total number of cars in the United States. We are currently projected to have global sales of 31.1 million electric vehicles in 2030.”

He also wrote that the higher domestic prices for natural gas were not the result of record exports, saying the ramp-up of these exports had “the potential to be the biggest green initiative on the planet, and it’s not even close.”

“Ramping LNG in a manner that specifically targets the replacement of foreign coal, particularly in China, represents the largest, fastest and most proven opportunity for the United States to address global climate change,” Rice wrote. “That’s the prize—reducing emission levels at a pace we’ve never seen, while simultaneously providing the world with cheap, reliable and clean energy.”

That’s an impressive return of the ball to Warren’s — and other politicians’ —court. Put simply, the choice for politicians like Warren is this: you can either have dirt cheap gas at home and be selfish about it or share the low-emission commodity with the world to help lower global emissions, because whatever the arguments against gas, nobody is arguing that it is dirtier than coal.

At the end of the day, unless the federal government passes legislation to limit exports of natural gas, there is nothing it can do to limit the corporate greed that is part of capitalism. Just the suggestion of more emissions-focused legislation appears to be prompting companies to make greater commitments in this respect, both in oil and gas. Perhaps the tensions between the U.S. administration and the energy industry could have a positive outcome.

By Irina Slav for

More Top Reads From

Share this post

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

You are posting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  
Followers 0