January natural gas futures were down 6.9 cents to $4.476 shortly before 9 a.m. ET Tuesday as diverging outcomes from the major weather models were raising uncertainty over the timing of a potential return to colder temperatures later this month.
The overnight Global Forecast System (GFS) trended colder, adding eight heating degree days (HDD) over the coming 16-day period, while the European model trended milder to lose 8 HDDs over the next 15 days, according to NatGasWeather.
“Both do maintain a milder than normal U.S. pattern through Dec. 23, then with increasing potential for cold air to pour across the Canadian border into the northern and west-central U.S. after,” the forecaster said. “It’s just the GFS is a bit colder and more aggressive/faster with it. We must expect the models to struggle the next several days as there’s a plethora of ways this can play out, especially in terms of just how frigid the air will be when it arrives and how long it will stay.
“...What’s now most important is if cold air arriving into the west-central U.S. around Dec. 21-23 can advance east of the Plains Dec. 24-26,” NatGasWeather said. “The overnight data was slightly more convincing, showing at least some sort of cold front pushing across the Canadian border into the U.S., but with a huge spread on what happens after and where the GFS model is once again colder, with a longer range cold outbreak than the European model.”
Radiant Solutions noted mixed changes to its latest six- to 10-day forecast Tuesday, with the South trending colder and the West warmer. The latest forecast showed no major changes for the Midwest and East, and above normal temperatures are still expected from coast to coast during the period.
In the 11-15 day, “models continue to advertise a changing pattern during this period, with Pacific flow waning as a ridge builds through Alaska,” Radiant said. The negative Eastern Pacific Oscillation “response is often one taking on colder themes in the U.S., and the forecast, which begins with widespread above to much above normal temperatures in the eastern half, allows for warmth to ease as the period progresses.
“Below normal temperatures are expected to return to parts of the West in the early half,” according to the forecaster. “It is not clear if cold in the West will make its way eastward, and the forecast is slow with this potential on a warmer forcing out of the tropics.”
Monday’s price action along the winter strip, with the January and February contracts trading in a wide range as they fluctuated between gains and losses, points to a market that is “struggling to establish direction,” according to EBW Analytics Group CEO Andy Weissman.
“Notably, while the January contract gained 5.7 cents, February lost 1.8 cents -- a rare divergence between the two, which normally trade in tandem,” Weissman said. “This divergence makes little sense. If current forecasts verify, natural gas prices may peak in February, when temperatures could be the coldest of the winter and the risk of well freeze-offs is high. The January/February spread could close soon.”
January crude oil was trading 73 cents higher at $51.73/bbl shortly before 9 a.m. ET, while January RBOB gasoline was up about 1.1 cents to $1.4300/gal.