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February NatGas Called Higher as Bulls Gain the Momentum

February natural gas was set to open about 3.4 cents higher at around $2.948 Friday, building on recent momentum as the market has been able to rally on sustained below normal temperatures heading into the new year.

The early gains Friday came after the prompt month surged 18.2 cents Thursday on an impressive amount of heating demand in the outlook through the first week of January.

"The forecast, once again, trends in the colder direction, with this being a result of yet another stronger round of the polar vortex dipping southward toward the Great Lakes and East," said MDA Weather Services in its latest six- to 10-day outlook Friday. "This, along with the slower evolution of high pressure toward the East leaves the Midcontinent colder as well.

"...Gulf of Alaska to Arctic ridging continues to provide a pathway for Arctic air masses diving southward into the Lower 48, and the result is a period with much and strong below normal temperatures across the Eastern Half."

Bespoke Weather Services said it sees potential warmer risks looking ahead to mid-January.

"Our sentiment sits between neutral and slightly bullish...as overnight we bounced off our next preliminary resistance level at $2.98 and do see room up towards $3.02 Friday should afternoon models support," the firm said.

"Yet there will be strong resistance between $2.98-3.02 that will need to be overcome." Large storage withdrawals should support prices the next three weeks, but looking to the third week of the outlook "signals continue to remain very warm, and if models do trend any warmer over the weekend we could see a sizable gap down in prices Monday evening."

From a technical perspective, ICAP Technical Analysis analyst Brian LaRose said after Wednesday’s close that “with the bulls promptly reclaiming the 100 week simple moving average the door has been cracked open for a late seasonal burst towards the $3.432-3.477 neighborhood.

"But there is one giant hurdle still standing in the bulls' way" in the $3.089-3.130 area. "Bulls need to better this next area of contention to achieve escape velocity. Fail to achieve escape velocity, and the trend will continue to point down."

February crude oil was set to open about 20 cents higher at around $60.04/bbl Friday, while January RBOB gasoline was down fractionally at around $1.7892/gal.

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