Overnight forecasts that lowered weather-driven demand expectations toward the second week of December sent natural gas futures plummeting early Monday. The December Nymex contract was down 11.2 cents to $2.553/MMBtu shortly after 8:30 a.m. ET.
NatGasWeather highlighted “notably milder changes” in the overnight guidance, with both the American and European models dropping an “impressive” 17 heating degree days from the outlook compared to Sunday’s data.
“Both weather models weren’t quite as cold with next week’s frigid blasts and then also favored stronger warming to spread across the country Dec. 7-10,” the forecaster said.
Initially stronger pricing coming out of the weekend break coincided with colder trends in the data starting next week and continuing through Dec. 6, but that preceded the “rather big decrease” in projected heating demand overnight, according to NatGasWeather.
“The natural gas markets are clearly going to be disappointed in seeing this, especially if it sticks in today’s midday data,” the forecaster said.
For the period from Saturday through Dec. 4, Maxar’s Weather Desk noted colder changes compared to Friday’s outlook. The cooler outlook is based on a “deeper trough progressing from the West at the start of the period and into the Eastern Half…Most areas average the period on the cold side of normal.”
For the Dec. 5-9 time frame, Maxar said confidence “remains lower than usual” because of the models “lacking agreement and consistency in their northern Pacific evolutions...Below normal temperatures are early along the East Coast before taking focus in the Rockies in the mid- to late period. Above normal temperatures are in Texas and expanding toward the Southeast late.”
Analysts at EBW Analytics Group described the weather outlook heading into Monday’s trading as a “major disappointment for bulls.” The firm estimated a 3.7 Bcf/d drop in expected weather-driven demand for the Dec. 6-12 period compared to Sunday’s outlook.
The period from Friday (Nov. 29) through Dec. 5 remains “much colder-than-normal,” but “this cold will be offset by a loss of industrial and commercial demand over the Thanksgiving holiday, which will keep prices at Henry Hub weak,” the EBW analysts said.
“Model runs at the end of the 15-day window remain conflicted; 56% of the members of the European model show a warmer solution in the East, but 44% call for colder weather to return. This afternoon’s model runs could have a significant market impact. If the warmer solution remains favored, though, gas prices could head lower as Thanksgiving nears.”
January crude oil futures were trading close to even at $57.81/bbl shortly after 8:30 a.m. ET, while December RBOB gasoline was down fractionally to $1.6675/gal.