December natural gas futures were trading 1.8 cents lower at $4.230/MMBtu shortly before 9 a.m. ET as forecasters continued to point to risks for milder temperatures by the middle of next month.
The overnight models generally agreed on a coming pattern featuring widespread milder weather early next week, more intense cold for Week 2 and long-range risks for colder temperatures to ease into mid-December, according to Bespoke Weather Services.
“There is a very strong signal for a significant cold shot from Dec. 4-10, which may continue to spook the market,” Bespoke said. “However, beyond Dec. 10 we have elevated confidence in the colder pattern breaking down, with a Gulf of Alaska vortex” and positive Eastern Pacific Oscillation “likely to delivery at least a couple weeks of milder weather.”
This means that while above-average gas-weighted degree days (GWDD) are likely the next two weeks, long-range GWDD losses are also likely, according to the forecaster.
“Our sentiment remains slightly bearish, though we note that the main selling in this environment may hold off until after options expiry today, which can often bring about surprising strength,” Bespoke said. “With cold peaking today we may not see cash prices be quite as firm,” though Wednesday is still forecast to be “quite cold.”
In the nearer term, Genscape Inc. forecasts show national demand remaining strong for the rest of this week, with nationally weighted heating degree days (HDD) expected to run colder than normal through Thursday. Tuesday and Wednesday are expected to be the coldest, with those days coming in around 212 HDD versus a norm of 162 HDD.
“Nearly the entirety of the cold remains east of the Mississippi,” Genscape senior natural gas analyst Rick Margolin said. “Following Thursday, national temps are forecast to run near normal until Dec. 5, after which another burst of cold is possible. Demand remains above the 90 Bcf/d mark through Wednesday, after which a slight regression with milder temps and the weekend will bring our estimate to a low of 73.5 Bcf/d by Sunday.
“After that, however, another forecast round of cold is expected for the week following, which is generating forecast demand estimates over 100 Bcf/d for the first time this winter. Last year, the 100 Bcf/d mark was not cracked until late December.”
Meanwhile, Genscape’s Spring Rock daily production estimates showed production climbed above 86 Bcf/d last Thursday for the first time since the end of October, according to Margolin.
“Since Thursday, production has averaged 86.35 Bcf/d, a 0.98 Bcf/d increase over the prior 30-day average. Texas alone accounts for nearly 0.74 Bcf/d of that growth, along with more than 0.2 Bcf/d higher output from the Northeast and Permian Basin, and 0.19 Bcf/d of growth out of the Rockies (principally the Denver-Julesburg Basin and the Bakken Shale).”
Looking at the technicals, analysts with Rafferty Commodities Group pegged major support levels for the December contract at $4.100/4.000/3.885 and major resistance at $4.588/4.750/4.880.
“We remain bullish but prefer to buy the market as close to our major support levels as possible,” the Rafferty analysts said.
January crude oil was down 38 cents to $51.25/bbl shortly before 9 a.m. ET, while December RBOB gasoline was trading about 1.6 cents lower at $1.4270/gal.