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Chilly Enough to Wake Bulls? January NatGas Called a Dime Higher

January natural gas was set to open about a dime higher at around $2.715 Monday, with the market rallying on some promising heating demand in the medium-range forecast.

PointLogic Energy analyst Alan Lammey said Monday the firm's six- to 10-day outlook, which has high forecast confidence, was showing "the arrival of potentially some of the coldest temperatures the nation has seen during late December in about 17 years.

"What is known is that an exceptionally amplified jet stream pattern will develop across North America with a series of strong ridges and troughs," Lammey said. "One of these is an impressively large and sharp trough that will dig southward across the Lower 48 allowing Arctic air to flood south. What remains uncertain at this time is how far east this surge of Arctic air will progress."

MDA Weather Services, in its latest six- to 10-day, said the forecast changes from Sunday “were colder from the West to the Midcontinent. This comes as a flow from the Arctic is established thanks to strong ridging over Alaska and ushers in much and even strong below normal temperatures into the Northwest, Rockies, Plains and Midwest.

"Belows are also expected to reach the East Coast as high pressure expands toward the region late in the period," MDA said. "Although, the forecast is warmer versus Sunday's report along the East Coast, where aboves average the period."

Bespoke Weather Services said the weekend weather guidance "finally picked up on the significant cold trends in the long-range we had been watching, as those translated into the medium-range and are seen bringing a very significant shot of heating demand to the country.

"...Prices did gap up in line with expectations last evening, though the gap was rather small compared to rather major cold trends, as bulls may still be timid in the face of such significant declines last week," Bespoke said "...It is clear that weather is responsible for almost all of this rally, and if cold were to trend unimpressive prices would quickly pull back."

As analysts with the ICAP Commodities Desk noted Monday, "it's been 'that kind of a month' for natural gas. Prices have been turning on their own logic, and storage draws (and one small build) have hardly been supportive."

The ICAP analysts said the Midwest region has been behind "storage report misfires" the past several weeks instead of "the usual culprit," the South Central region.

The Energy Information Administration "reported a 15 Bcf pull for” the South Central region, “and the rest of the market was about 5 Bcf lower," the analysts said. "Most analysts managed to overshoot the Midwest forecast for last week as well, so we may see some true-up for both regions this week. Preliminary forecasts for this coming week are all over the lot, as colder temperatures invaded a number of key eastern demand areas late last week."

January crude oil was set to open about 30 cents higher Monday at around $57.60/bbl, while January RBOB Gasoline was up about 1.4 cents to around $1.6686/gal.

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