A bullish turn in the latest weather outlooks that is keeping cold weather trapped across major natural gas demand centers for the next couple of weeks sent November natural gas prices up more than 10cents to $3.266just before 9 a.m. ET Monday.
The Nymex November natural gas futures was strong out of the gate, steadily climbing throughout the early morning as the colder weather situation looked to reduce projected mid-November storage to “perilous levels,” EBW Analytics said.
As the Pacific pattern appeared ready to break down, an upstream negative North Atlantic Oscillation block looked to develop in the medium range and help keep cold weather trapped across the East through Week 2 and into the beginning of Week 3, ensuring heating demand remains solidly above average into the end of October, according to Bespoke Weather Services.
“This is a pattern with a much different look; we expect the negative Eastern Pacific Oscillation to ease off significantly in strength, and a weak Gulf of Alaska vortex is even possible,” Bespoke chief meteorologist Jacob Meisel said.
Bespoke also sees blocking and ridging building across Canada, as well as a negative North Atlantic Oscillation ridge upstream, which is expected to force colder weather into the East. “Such patterns can remain rather sustained until the blocking breaks down too, resulting in even colder expectations into Week 3.
Though the forcing for this blocking does appear temporary, it can often take a week or two to break down any block and warm the pattern,” Meisel said.
NatGasWeather expects the coming colder pattern to further increase deficits in storage inventories versus the five-year average to more than 650 Bcf, and more likely toward 700 Bcf. “So clearly the background state will remain bullish for quite some time until record production finally shows signs of improving deficits, something that’s not expected to happen until after October due to the coming colder-than-normal pattern.”
In addition, power has been restored to most customers affected by former Hurricane Michael, EBW said. “If the current weather forecast holds, resistance could be retested at last week's intraweek highs,” EBW CEO Andy Weissman said.
Cash was weak to end last week, and although it is expected to be stronger on colder forecast trends and current cold diving into the South, Bespoke said power burns are solidly looser and production is recovering from Michael and set to make record highs once it does so. “...any cracks in weather can very quickly hit prices (like we saw last week), keeping our sentiment from turning fully bullish despite major gas-weighted degree day adds,” Meisel said.
Crude oil futures were trading 43 cents higher at $71.77, and RBOB Gasoline futures were trading at about nine-tenths of a cent higher at $1.9505.