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Weekend Cold Shift Seen ‘Incredibly Bullish’ as Natural Gas Futures Surge Higher

Bolstered by a significant increase in both medium- and long-range heating demand expectations for the Midwest and East in forecasts over the weekend, February Nymex natural gas futures were trading 29.9 cents higher at $3.398/MMBtu shortly before 9 a.m. ET.

Changes in the weather models over the weekend were “incredibly bullish” with intense cold arriving for the final third of January, enough to potentially put $3.50 in play for the front month, according to Bespoke Weather Services.

“A very significant cold shot is expected” from next Sunday through Jan. 22 “as a lobe of the polar vortex swings down across North America,” Bespoke said. Cold will be focused from the Midwest into the East, driving gas-weighted degree days (GWDD) to near-record levels for a few days, according to the forecaster.

“We then see cold briefly relax, with GWDDs consistently running above average through this time,” Bespoke said. “There is incredible model agreement that very significant cold returns as well through the final week of January and into early February, with risks of another lobe of the tropospheric polar vortex swinging through.”

Radiant Solutions similarly highlighted a large shift to more frigid temperatures for both its six- to 10-day and 11-15 day forecasts Monday.

The forecaster’s latest six- to 10-day outlook included a “significant change in the colder direction from the Interior West toward the East Coast compared to Friday’s expectations, with the Eastern Third coming in additionally colder” compared to Sunday’s expectations. “A round of much below normal temperatures accompany high pressure into the Plains at the start of the period and expand south and eastward. By mid-period, most of the Eastern Half is forecast in the much to strong below normal categories.”

The 11-15 day also featured “sizeable changes in the colder direction” compared to Friday, according to Radiant.

“From a large-scale pattern perspective, polar flow is directed into the U.S. by features on the Pacific side and also over the high latitudes,” the forecaster said. This includes features associated with the negative Eastern Pacific Oscillation and Arctic blocking that result in “widespread coverage of below to much below normal temperatures, including Central strong belows late. East Coast storminess has confidence being lowest there.”

Turning to the technicals, analysts with Rafferty Commodities Group had been looking for more follow-through to the upside Monday after trading late Friday “showed the market’s strength.” After rallying 13.0 cents Friday, the February contract closed right at the upper boundary of a recent consolidation pattern between $3.104 and $2.867, the analysts said.

February crude oil futures were trading 69 cents lower at $50.90/bbl shortly before 9 a.m. ET, while February RBOB gasoline was down about 1.4 cents to $1.3866/gal.

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