Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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US NATURAL GAS: DRAWING CONCLUSIONS © Leo Haviland February 17, 2014

United States natural gas inventory days coverage probably will be quite low at the end of the 2013-14 winter draw season. The NYMEX natural gas complex includes not only the nearest futures continuation benchmark, but also actual calendar months and actual seasonal (summer; winter) and calendar year strips. These various marketplaces do not necessarily all travel in the same fashion. Yet assuming normal weather for the balance of this winter, the NYMEX natural gas complex “in general” probably will continue its major bull move.

Given the expected low days coverage in US natural gas inventories by end March 2014, it would be unsurprising if the NYMEX nearest futures continuation contract significantly challenged major resistance around 6.10 (recall the January 2010 pinnacle). However, as winter ends and the nearest futures natural gas contract becomes a springtime one (such as April 2014 or May 2014), sustained moves in the front month contract over 6.10 will be difficult (at least in the near term). The supply/demand situation for the actual March 2014 gas contract (the current nearest futures) is not quite the same as that for the May 2014 one (when inventories are building). If colder than normal weather occurs during the balance of this February and March, a spike above the 610 summit (even if it does not last very long) is probable.

Admittedly, the NYMEX natural gas complex is vulnerable to a rather significant price decline from recent tops. Suppose weather for the balance of this winter season is warmer than normal; that may help to inspire a price drop.

However, even with normal weather, interim price declines may occur. Although the current inventory situation in US natural gas displays rather low days coverage relative to consumption, the shortage will become less severe during calendar 2014 as a whole due to a year-on-year rise in production and fall in demand.

Though the April through October 2014 build season probably will reduce the existing significant days coverage shortfall, it will not eliminate it. Since days coverage for the next several months (through the 2014 build season at least) probably will remain somewhat below normal, this will tend to support prices in the NYMEX natural gas complex in general.

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US Natural Gas- Drawing Conclusions (2-17-14)
Charts- NYMEX natural gas (3 charts, for essay US Natural Gas- Drawing Conclusions) (Feb 17, 2014)

NYMEX NATURAL GAS- A HISTORY OF BEAR TRENDS © Leo Haviland, February 28, 2012

What does historical analysis of noteworthy United States natural gas bear marketplace moves reveal (NYMEX nearest futures continuation basis)? It generally confirms the conclusion that “the long run bear trend probably ended with the 1/23/12 low around 223” (see “US Natural Gas- There Has Been and Will Be Blood”; 1/31/12). In addition, that review also indicates a significant possibility that NYMEX natural gas will reach a second low distant in time from but close in price level to the January 2012 bottom. The most likely time for this “double bottom” is late August/calendar September 2012.

Marketplace history is never marketplace destiny. Over two decades of NYMEX natural gas history is substantial, yet it is not an extremely long period. Compare US stock marketplace benchmarks such as the Dow Jones Industrial Average or the S+P 500. In addition, definitions and identifications of bull, bear, and sideways marketplaces and their alleged trends reflect opinions. Designation of particular start and end dates for apparently notable moves likewise reflect personal outlooks.

Also, interpretation of natural gas can focus on more than the nearest futures continuation contract. One may choose to peer at individual actual contract months (as in the April 2012 futures contract), several trading months of a season (as in summer 2012), calendar years (as for the calendar 2013 strip of contracts), spreads (such as NYMEX March 2013/April 2013), and regional (basis) relationships. Insight into natural gas marketplaces and their bull and bear trends can derive from analyzing electricity, coal, other marketplaces, and assorted additional economic and political phenomena as well. In natural gas as in other arenas, supply/demand investigation can intertwine with so-called technical analysis.

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NYMEX Natural Gas- A History of Bear Trends (2-28-12)