Weather Models Show 'Most Bullish Setup' of Season as Natural Gas Futures Rally Early – Natural Gas Intelligence

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As updated weather models raised the prospect of intense winter chills reaching key markets later this month, natural gas futures were trading sharply higher early Monday. The February Nymex contract was up 24.0 cents to $4.156/MMBtu at around 8:45 a.m. ET. March was trading 18.5 cents higher to $3.911.
In the most recent models heading into Monday’s trading, the pattern starting around Jan. 20 was “very impressive” in the amount of cold advertised, according to Bespoke Weather Services.
Models showed “a deep trough diving into the central/eastern U.S., easily the strongest modeled pattern we have seen this winter in terms of the ensemble output,” Bespoke said.
The question will be whether this modeled cold progresses forward in the forecast, the firm said.
“Pattern signals do suggest colder risks into the final third of the month, before hinting at a possible return of the more classic La Niña base state into February,” Bespoke said.
As for prices, production was also likely a contributing factor to the rally early Monday, Bespoke said, pointing to output that remained “stuck down in the 92.0-92.5 Bcf/d range, having seen no recovery from last week’s dip.”
NatGasWeather similarly characterized the pattern heading into the final third of January as “the coldest/most bullish setup” of the winter season to date, with Canadian air expected to move “aggressively” into the Lower 48.
“The focus will soon be on just how long” frigid temperatures during this time frame last, the firm said.
In terms of balances, cold temperatures in the near term could lead to production freeze-offs over the next few days, keeping supply below the highs recorded in December, NatGasWeather said.
Colder conditions should also see the next two Energy Information Administration (EIA) reports shrink the current inventory surplus to the five-year average, according to the firm.
“And if the cold pattern Jan. 21-26 holds, as we expect, surpluses will flip to deficits in late January,” NatGasWeather said.
For the next EIA report, NGI’s machine learning model predicted a 164 Bcf withdrawal for the week ended Jan. 7. The year-earlier print is 153 Bcf, while the five-year average is a pull of 144 Bcf.
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