Another round of warmer trends from the latest forecasts, countering a colder shift the previous day, had natural gas futures easing lower early Tuesday. The February Nymex contract was down 1.4 cents to $2.121/MMBtu shortly after 8:40 a.m. ET.
Weather models overnight shifted “considerably warmer,” more than enough to offset colder trends from Monday’s runs, according to Bespoke Weather Services.
“While we do see some strong cold on the maps, it remains focused in Canada and down into the western states, unable to shift into key areas of the East and South,” the forecaster said. “...We are still watching the shifts in tropical forcing for possible colder risks late month, but the pattern even out at Day 15 does not look inspiring for a material colder shift into the 16-20 day.”
This puts January 2020 on pace to rank in the top five warmest Januaries going back to at least 1981, according to Bespoke’s dataset.
Maxar’s Weather Desk highlighted warmer trends in the Southeast at the start of the 11-15 day (Jan. 17-21), with colder adjustments made to the central Lower 48 toward the middle of the period.
“The eastern warmth leading into the period should ease in this time frame, as the Madden-Julian Oscillation propagates into phase six,” the forecaster said. “The phase is historically associated with an increase in variability this time of year.”
From Sunday through Jan. 16, Maxar’s latest outlook showed colder temperatures over the West and warmer than normal temperatures for the eastern half of the Lower 48.
“This includes rounds of much and strong aboves in the Midwest, South and East, where the forecast leans warmer than previous,” Maxar said. “The focus of colder air will be in the West, especially the far northern Rockies, where strong belows are expected.”
The natural gas market has been “struggling to find direction,” according to EBW Analytics Group analysts, who said traders are likely bracing for a potential repeat of last January’s price action, when cold weather arrived and sent front month prices rallying well above the $3 mark.
“Even in a bullish scenario, gas prices are not likely to reach this high this month,” the EBW analysts said. “The potential for a repeat, however, is causing some shorts to cover their positions and new longs to enter the market. The outcome of the struggle between bulls and bears will depend heavily on weather model runs for the remainder of the week.”
February crude oil futures were down 41 cents to $62.86/bbl shortly after 8:40 a.m. ET, while February RBOB gasoline was off about 1.8 cents to $1.7369/gal.