Bullish Afternoon Weather Models Stabilize Natural Gas

December natural gas prices were in free-fall this morning as cash prices significantly weakened amidst a looser background supply/demand balance and much warmer weather nationally tomorrow. Yet some afternoon weather model guidance added heating demand to medium-range forecasts, helping prices stabilize and recover into the close, as seen below. 

As an example, the American GEFS increased cold risks in the 8-14 Day time frame, showing southeastern ridging being more suppressed and accordingly fewer above average temperature anomalies (courtesy of the Penn State E-Wall Map Site). 

Climate Prediction Center forecasts in the 8-14 Day period similarly decreased warm risks across the East. 

Yet the natural gas strip did not exactly turn supportive even with the GWDD additions. The smallest losses (just 3 ticks) were seen for the prompt month December contract, with losses a bit more significant out along the strip. 

We came into the day seeing significant weakness along the strip, and this morning our Morning Update to clients included a recent map of H/J spreads out along the strip, which shows how both the 2018 and 2019 spread were coming under fire as the market loosened. 

Still, our Afternoon Update for clients increased GWDDs by 8.5 over the next 15 days from the Morning Update as we digested colder risks in the medium-term that have continued to become higher confidence. The result was another tick higher in Z/F. 

Yet it is unclear if medium-range GWDD additions will be enough to save or rally this market. EIA data due out tomorrow may give us a better sense of current market tightness, and traders are eagerly awaiting the number. Each morning we publish EIA data estimates for the next 4 weeks, as well as GWDD forecasts and our forecast for natural gas price action through the day. 

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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