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Models Increase Confidence in Long-Range Arctic Cold as Natural Gas Futures Called Higher

February natural gas futures were trading about 11.1 cents higher at $3.612/MMBtu shortly before 9 a.m. ET Wednesday as major weather models continued to advertise a stretch of frigid, Arctic-influenced temperatures set to commence later this month.

The latest forecasts as of Wednesday morning showed demand easing slightly in the six- to 10-day window, according to EBW Analytics Group.

“The forecast still calls for a strong cold spike this weekend, but the arrival of much colder weather has been slightly delayed,” EBW CEO Andy Weissman said. “These detailed changes aside, however, both the American and European models are increasingly converging on intense, bitterly cold Arctic air descending deeply into the country during days 11-15 of the current forecast and to last well into February.

“If this forecast holds, the winter-month contracts could surge higher again over the next few trading sessions. Even steeper increases are possible in early February if widespread well freeze-offs occur, as appears increasingly likely. Stay tuned.”

Radiant Solutions similarly noted warm changes to its latest six- to 10-day outlook Wednesday, with the 11-15 day forecast trending colder.

In the six- to 10-day window, “storm-based variability brings warm changes to the forecast for the South, with changes elsewhere being mixed,” Radiant said. “These include a warmer start to the period in the Midwest but a colder finish. Opposing changes are seen in the East, where an additional colder outlook has temperatures in the strong below normal category at the start before moderation briefly brings temperatures to the warm side of normal for the second half.

“Uncertainty increases during the mid to late period as it relates to low pressure tracking through the Eastern Half, but polar flow left in its wake has agreement among guidance.”

As for the 11-15 day outlook, Radiant said consistency from the models has increased confidence in the larger pattern themes, including a negative Eastern Pacific Oscillation and “ridging near Alaska and built northward” that “helps to direct Arctic air southward and toward the U.S. In addition, a northern Atlantic blocking ridge built northward through Greenland helps to enhance this flow and results in widespread below normal temperatures.”

The forecaster said the “coldest anomalies” are on track for the Midwest, with much below normal temperatures also forecast for the South and East during the period.

Looking at the technicals, analysts with Rafferty Commodities Group noted that the bulls managed to make a higher high Tuesday, building on the momentum from Monday’s rally, before prices ultimately fell back to settle 9 cents lower on the day.

“At this juncture we still like the market,” Rafferty analysts said. “The 9-cent decline following Monday’s explosive move is likely due to profit taking. The weekly chart from last week and the breakout tell us that there is more upside.”

Heading into Wednesday’s session, Rafferty analysts pegged major resistance levels at $3.770, $4.000 and $4.088. The firm listed minor support levels at $3.380 and $3.280, with major support at $3.105 and $3.067.

February crude oil was trading about 56 cents lower at $51.55/bbl shortly before 9 a.m. ET, while February RBOB gasoline was off about 1.3 cents at $1.3988/gal.

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