February natural gas was set to open about 4 cents higher Tuesday at around $2.996, with arctic cold in the near-term lifting the market as a potential warm-up lingers in the longer-term.
After gapping up over the weekend and moving into the $3.080-3.100 range, the February contract had pulled back to around $3 ahead of Tuesday's open.
"Harsh winter weather dominated the New Year's holiday weekend as a potent shot of Arctic air plunged southward into the U.S.," PointLogic Energy analyst Alan Lammey said. "On New Year’s Day, high temperatures in Chicago barely broke zero degrees, while St. Louis, Kansas City and Indianapolis only saw single digits, which was around 30 degrees colder than average.
"Major cities of the Northeast from Philadelphia to Boston were stuck in the teens, more than 20 degrees colder than normal."
The market could be eyeing a break-up in the cold starting around the second week of the new year, according to Bespoke Weather Services.
"Weather guidance added the long-range warmer risks we had generally expected, though a couple cold shots" Jan. 10-11 and Jan. 14-15 "appear enough to at least temporarily provide a bit more upside for natural gas prices," the firm said.
"With such intense short-term cold, stockpiles are likely to be depleted enough to significantly increase weather sensitivity over the coming weeks, meaning a couple more cold shots have clearly been able to boost the front of the natural gas strip...The technical picture has severely weakened with prices reversing overnight, and we see a bit of resistance at $3.02 with very strong resistance from $3.10-3.12."
Meanwhile, Genscape Inc. said to expect volatile trading across natural gas markets Tuesday "with short covering likely coming out of a holiday weekend that in many areas materialized colder than forecast headed into the weekend. On the supply side, freeze-offs across Lower 48 continues to choke back volumes."
Genscape’s Spring Rock daily pipe production estimate "has current volumes below 72 Bcf/d, though, as always we urge caution with first-of-month nominations data on production points. On Dec. 31, production was estimated to have fallen to a 43-day low of 74.8 Bcf/d."
As for demand, Genscape said, "Lower 48 consumption has stayed above 100 Bcf/d since the day after Christmas and stands at an estimated 111 Bcf/d Tuesday."
February crude oil was set to open slightly lower at around $60.26/bbl Tuesday, while February RBOB Gasoline was down around a penny at $1.7836/gal.