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Intense Cold Potentially Easing by Early February; Natural Gas Futures Called Lower

February Nymex natural gas futures were down 23.8 cents to $3.244/MMBtu shortly before 9 a.m. ET Tuesday as the latest forecasts indicated the current cold pattern might give way to warmer temperatures early next month.

The latest weather data showed cold temperatures struggling to stick around through the end of the Week 2 outlook period, with warmer temperatures potentially moving in to start Week 3, according to Bespoke Weather Services.

“Model guidance over this weekend maintained cold in the medium-range in line with expectations but showed far more warming in the long-range than expected, as the upstream pattern across the Pacific looks to temporarily break down with less favorable blocking while the downstream Atlantic fails to see the blocking develop we would prefer to lock in major cold,” Bespoke said.

The forecaster said it was skeptical of the pattern change, however, with the potential that models are rushing the transition away from significant cold.

Meanwhile, demand in the Northeast rose to a season-to-date high during Monday’s cold blast, climbing above 25 Bcf/d, according to Genscape Inc. analyst Josh Garcia. New England demand reached 4.4 Bcf/d, the second highest daily total of the season so far.

“Southeast demand actualized at 10.2 Bcf/d, which was low compared to some market expectations,” Garcia said. “Previously this winter Southeast demand had reached as high as 11.8 Bcf/d.”

Demand across the Energy Information Administration’s East storage region approached 40.0 Bcf/d Monday, but early indications showed consumption falling to 35.9 Bcf/d for Tuesday’s gas day amid somewhat milder temperatures, according to Garcia.

On the supply side, Genscape data showed a combination of freeze-offs and operational issues cutting Lower 48 production to an estimated 84 Bcf/d as of Tuesday, with volumes dropping as low as 83.5 Bcf/d on Sunday, a 122-day low.

With the emergence of the current cold event, Energy Aspects said it cut more than 200 Bcf from its end-January storage estimate.

“That whittling down puts a significant focus on February weather, as a follow-on cold event...would reignite deliverability concerns in some regions,” the firm said. Production losses could also “see current withdrawal estimates increase notably. Trading will continue to move in sympathy with the weather outlook.”

February crude oil was trading 86 cents lower at $52.94/bbl shortly before 9 a.m. ET, while February RBOB gasoline was down about 2.9 cents to $1.4235/gal.

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