Natural gas futures were trading slightly lower early Wednesday as the latest guidance continued to suggest upcoming cold will fade by early next month. The November Nymex contract was down about 0.8 cents to $2.264/MMBtu shortly after 8 a.m. ET.
The overnight weather data was mixed, with the American model shifting “considerably warmer” and the European model adding a small amount of demand to the outlook, according to Bespoke Weather Services. The American guidance had been much colder than its European counterpart, so the overnight changes bring the models closer together, the forecaster said.
“There are still some key differences, however. Both models show a strong shot of cold arriving in the six- to 10-day period, focused in the middle of the nation, lingering into the 11-15 day,” but the American model “goes warmer by Day 15, showing an upper look that would end the cold pattern,” Bespoke said. The European model “weakens the cold at the end of the 11-15 day as well, but does not look ready to end the pattern” like the American model. “We do favor moderation after the first week of the month.”
Tuesday’s data had hinted that cold air would fade and ease national demand starting around the second week of November, according to NatGasWeather.
“All overnight weather models were on board with this general scenario but differed on the amount of cold into the U.S. to end October, and then how fast warming would spread across the U.S. after,” NatGasWeather said. “...Of considerable interest, it will now take colder trends in the weather data for Nov. 4-8 if weather sentiment is to be considered bullish for this period.
“...The natural gas markets could easily use the milder back end of the 15-day forecast as reason for prices to sell off,” especially with the American model “losing a hefty number” of heating degree days overnight.
Tuesday’s price action suggested a market “struggling to establish direction,” according to analysts at EBW Analytics Group, who said bears were able to reassert themselves late in the session to cut into gains recorded earlier in the day.
“The market appears to be caught between two conflicting forces,” the EBW analysts said. “With colder weather expected by mid to late next week, cash prices are likely to continue to rise. With production soaring, however, and the durability of colder weather uncertain, traders are reluctant to take long positions, leaving natural gas trapped in a narrow trading range.”
December crude oil futures were off 56 cents to $53.92/bbl shortly after 8 a.m. ET, while November RBOB gasoline was down fractionally to $1.6027/gal.