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Weather Models Mixed on Late-Month Cooling; March Natural Gas Called Lower

March natural gas was set to open Wednesday about 3 cents lower at around $2.560 as forecasters noted some weakening in a pattern that indicates colder weather in late February.

Overnight changes in the European and Canadian guidance both backed off a pattern expected to “allow heating demand to return to average quicker across the country” later this month, according to Bespoke Weather Services. The Global Ensemble Forecast System showed “a much colder pattern across the country by the end of February.”

Bespoke reduced its two-week gas-weighted degree day forecast overnight in response to the European and Canadian guidance.

“We should gradually transition into a colder pattern by early March, but the timing of that transition remains rather uncertain still,” Bespoke said. “Our sentiment remains slightly bullish despite prices pulling back and less supportive weather guidance, as we see risk still skewed more to the upside moving through the week.”

Radiant Solutions noted “a small warm change” to the forecast in its 11-15 day outlook “for parts of the South, but like the previous outlook” a pattern remains “that holds warmer ridging over the South and East while having a focus of below-normal temperatures in the West.

“The forecast allows for the more intense coverage of aboves in the Eastern Third to fade in the latter stages, giving consideration to negative trends in the North American Oscillation (NAO),” Radiant said. But models disagree on how quickly this “becomes an established pattern; given poor skill at this lead time all season from the various models, confidence is held at very low levels.”

From a technical perspective, analysts with Rafferty Commodities Group said they have marked $2.520 as major support sitting “at the lower end of a longer term consolidation pattern.”

“For Wednesday’s trading, we have listed the same major support levels again: $2.527 and $2.485. A break of the $2.520 area on a closing basis could send the market considerably lower,” the analysts said. “On the other hand, if the market cannot get through this level, it should experience a bounce, especially after the sell-off that preceded it.”

ICAP Technical Analysis analyst Brian LaRose similarly pointed to $2.521 as support.

“If we are going to get any sort of bounce before sliding to $2.189-2.121, this is where that pop should occur,” LaRose said. “Hold $2.521 and we will likely be forced to wait until April rolls into the spot position to have a shot at our $2.189-2.121 objective. Fail to hold $2.521, expect a drop to our target before March rolls off the board.”

March crude oil was set to open about 85 cents lower at around $58.34/bbl, while March RBOB gasoline was trading about 2.7 cents lower at around $1.6578/gal.

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