Following somewhat milder trends overnight from the major weather models, February Nymex natural gas futures were down 17.4 cents to $3.242/MMBtu shortly before 9 a.m. ET Friday.
Both the Global Forecast System (GFS) and European trended milder overnight, with the GFS dropping more than 25 heating degree days (HDD) from the most recent outlook, according to NatGasWeather.
“It’s still a rather bullish pattern with HDDs running much greater than normal; it’s just the markets are suggesting they want sustained cold without backing off, and that didn’t happen in the overnight data, especially the GFS model,” NatGasWeather said. “...We see risk over the weekend break toward colder trends, but best to wait to see what the early morning and midday weather data shows to see if it offers additional clues.
“We must expect another trading day with the potential for swift 20-cent price swings, aided by players positioning ahead of another dangerous weekend break where some markets will be closed Monday” for Martin Luther King Jr. Day.
With prices reacting strongly to milder trends despite an overall bullish pattern, the market appears to be skeptical of the upcoming cold shift, according to EBW Analytics Group CEO Andy Weissman.
“The natural gas market is taking a ‘prove it to me’ attitude,” Weissman said. “During the past three days, forecasts have moderated slightly, but still call for bitterly cold weather this weekend and much colder-than-normal weather in Weeks 2 and 3.
“After the forecast bust that occurred in late December, however -- in which the very cold weather predicted by both the European and American models never arrived -- the market is waiting for cold to verify before reacting,” he said. “The likelihood remains high that Week 2 and Week 3 will see by far the coldest weather so far this winter, with the potential for extreme cold to generally continue for most of February, with 200 Bcf-plus withdrawals...If this occurs, prices could still rebound sharply.”
Looking at the technicals, the front month early Friday was pushing below a key support area around $3.370 that the market had held in both Wednesday’s and Thursday’s sessions, according to analysts with Rafferty Commodities Group.
“A close above this area would tell us that the market is likely going higher,” the Rafferty team said.
Heading into Friday’s session, Rafferty listed minor support at $3.280/3.260, with major support levels at $3.150/3.104/3.060. The firm pegged minor resistance at $3.500/3.590, with major resistance at $3.700/3.770.
February crude oil was up 62 cents at $52.69/bbl shortly before 9 a.m. ET, while February RBOB gasoline was up fractionally to $1.4388/gal.