December natural gas futures were trading 4.2 cents lower at $3.513/MMBtu shortly before 9 a.m. ET Wednesday, with markets watching for further signals from forecasts on how much warming will follow the upcoming winter weather pattern.
NatGasWeather said weather models maintained milder trends overnight for Nov. 17-21, although the Global Forecast System (GFS) came in colder than the other models.
“All weather models besides the GFS see milder temperatures gaining across much of the country Nov. 17-21 with demand easing to lighter levels,” the firm said. “The GFS shows cold air sneakily finding ways to slide out of Canada and across the Great Lakes and into the East to keep chilly conditions in place Nov. 17-21.
“Today’s early morning and midday GFS weather data will be of keen interest to see if it continues to show ways cold is able to linger, or if it trends milder to fall better in line with the other models, including the European,” NatGasWeather said. “The GFS has been the more accurate model over the past week on the coming series of cold shots, so it it holds firm to the cooler side, the afternoon European model will then be watched closely to see if it again concedes to the colder GFS.”
EBW Analytics Group CEO Andy Weissman said it’s “generally bullish” that the market has held onto almost all of the gains from Monday’s big rally.
“Current forecasts indicate that at least some moderation in temperatures is likely” for the firm’s storage outlook for Nov. 16-22, after “extremely cold mid-winter like weather” expected for the second week of storage (Nov. 9-15), Weissman said. “The main issue, however, is whether the Alaska ridge will persist beyond Week 3, or be replaced by more significant warming.
“This morning’s model runs do little to answer this question. Range-bound trading could continue today. But cash prices at Henry Hub already have reached $3.50. With much colder weather soon, cash prices could jump sharply, pushing futures higher.”
Meanwhile, the first major cold system of the winter is descending into the northern tier of the Lower 48, according to Genscape Inc. After pushing demand higher in Alberta, “the cold is now extending southward into the pipeline-constrained Pacific Northwest,” senior natural gas analyst Rick Margolin said. “Demand in the region is at 2.1 Bcf/d and should continue climbing to a high near the 2.4 Bcf/d mark early next week.”
The Midwest is expected to see heating degree days (HDD) continue climbing to a peak of around 36 HDDs by Saturday, 14 more than normal for this time of year, according to the analytics firm.
“Another cold blast is forecast for early next week,” Margolin said. “Forecast temperatures across that region are expected to remain 7-15 HDDs colder than normal through next Thursday. We have demand in the area increasing from 10.8 Bcf/d today to a high of 11.2 Bcf/d by the start of next week.”
Genscape’s production team is watching for signs of potential freeze-offs, but the risk appears low at the moment, according to the analyst. While the Permian Basin producing region is expected to see colder temperatures, it’s not expected to be cold enough to trigger freeze-offs.
Last year’s first freeze-off arrived close to New Year’s Day, “when low temperatures sank into single digits and daytime highs remained below freezing just a day after a high of 70 degrees,” Margolin said. “The event lasted roughly four days and took out about 6 Bcf of production.”
December crude oil was up 54 cents to $62.75/bbl shortly before 9 a.m. ET, while December RBOB gasoline was up fractionally to $1.7002/gal.