Major overnight cold trends for early December helped send natural gas futures sharply higher in morning trading Wednesday ahead of the latest round of government inventory. The December Nymex contract was up 57.9 cents to $7.358/MMBtu at around 8:40 a.m. ET. January was up 51.0 cents to $7.916.

Storage Estimates

EBW Analytics Group analyst Eli Rubin attributed the early surge in natural gas prices Wednesday to a combination of “increasing early-December cold, bullish technicals and a correlation with strengthening” prices at the Dutch Title Transfer Facility benchmark.

The weather outlook for the Dec. 2-8 time frame “continues to turn sharply colder,” adding 10.1 gas-weighted heating degree days over the prior 24 hours as of early Wednesday, Rubin said.

“While the locus of cold is over the Plains, Arctic air masses could sweep eastward into mid-December,” the analyst said.

For a number of reasons, including the potential for further shifts in the weather outlook, the upcoming holiday weekend introduces risks for increased volatility, according to Rubin.

“With the recent sprint higher for gas prices, impending December contract rollover, and Thanksgiving weekend often delivering major weather shifts, Nymex gas price volatility could spike heading into the holiday,” the analyst said.

This comes as traders will also have to factor in potential price impacts from the latest government inventory data Wednesday.

Surveys show expectations clustered around a withdrawal in mid-80s Bcf from the Energy Information Administration’s (EIA) weekly storage report, scheduled for noon ET today. The report, covering changes to U.S. natural gas stocks during the week ended Nov. 18, is coming out a day earlier than usual due to the Thanksgiving holiday. 

Estimates submitted to Reuters ranged from withdrawals of 65 Bcf to 111 Bcf, with a median decrease of 86 Bcf.

Bloomberg’s poll also found a median withdrawal estimate of 86 Bcf. Predictions ran from pulls of 74 Bcf to 111 Bcf. The Wall Street Journal survey landed at an average pull of 89 Bcf. Estimates spanned decreases of 81 Bcf to 111 Bcf.

NGI predicted a pull of 65 Bcf. That compares with a decline of 14 Bcf in the year-earlier period and a five-year average decrease of 48 Bcf.

“It was colder than normal over most of the U.S. besides the far East, while wind energy generation was lighter week/week,” NatGasWeather said of conditions during the latest EIA report period. “We expect a draw of 86-87 Bcf.”

This week’s EIA print represents an “important” gauge of the “first decent cold of the season,” the firm added.