Infinity Insights – Volume 8, Issue 16

AT-A-GLANCE SUMMARY

NYMEX natural gas range trading continues between $2.80/MMBTU and $2.60/MMBTU for the spot month.

SUMMARY OF THE LAST WEEK IN CHARTS

Spot month natural gas (June) has support at 2.60 with resistance at 2.80 then 2.90 Calendar year 2019 has support at 2.70, then 2.60 with resistance at 2.76. Calendar year 2020 has support at 2.69 with resistance at 2.76.For a look at our monthly market reports, visit Infinity Power Partner’s Market Overview.

Roadmap

NYMEX natural gas spot month (June) finished off $0.0135 at 2.711.

1

What’s This? – The “Roadmap” is the price action chart depicting the NYMEX natural gas spot month. It’s important because it is essentially the trading community’s market sentiment.

Cal 19

Calendar 2019 closed down ≈$0.0325 at $2.69.

2

What’s This? – “Cal 19” is the first complete 12-month strip. It gives you a visual of price action and provides a reference point for our take on the market.

Cal 20

Calendar 2020 closed off ≈$0.005 at $2.6925.

3

What’s This? – “Cal 20” is the second complete 12-month strip. It gives you a visual of price action and provides a reference point for our take on the market.

OUR TAKE ON THE MARKET

NYMEX natural gas range trading continues between $2.80/MMBTU and $2.60/MMBTU for the spot month. The nearby calendar strips have been losing ground to deferred calendar strips, a bearish tell. Traders discuss the late draws from natural gas storage and the resulting low levels, yet price action doesn’t reflect concern for shortfalls. There is a sense that folks are waiting for the next shoe to drop.Turning to ERCOT power prices, we note that the forward curve of heat rates is at or near new highs up front, something interpreted as concern for sufficient resource adequacy (generation) this summer. This concern is publicized by regulators in their Seasonal Assessment of Resource Adequacy: ttp://www.ercot.com/content/wcm/lists/143976/SARA-FinalSummer2018.xlsx (recent comments have softened concern somewhat).Visiting with veteran industry players, we hear this concern reiterated. There is a vocal “what if” that suggest scary price scenarios. Recollections of the August 2011 experiences are in most traders and risk managers’ minds, and price action reflects it. What gets our attention is the almost inevitable question, “will August be wet?” So, as is almost always the case for natural gas, weather will drive direction.Bottom line, decision makers can more easily explain away fixing prices through summer, even at a high premium for “insurance”, than they can explain not doing anything if markets go crazy.