Bullied by sudden and seldom-seen agreement between private and governmental weather forecasting agencies last week, natural gas futures spiked 40-50 cents higher Wednesday evening and Thursday as traders initiated long positions that they had liquidated over the past several weeks.

An updated weather forecast released by Salomon Smith Barney (SSB) meteorologist Jon Davis points toward an “arctic plunge” that is expected to grip most regions of the country in the second week of January.

Meanwhile, the National Weather Service agreed last week that below-normal temperatures should return during that period. While calling for above normal temperatures for much of the country in its six- to 10-day forecast, NWS looks for below normal temperatures over the eastern half of the country for the Jan. 9-15 time frame. Only California and the Southwestern corner of the country are expected to see above normal temperatures during that period.

SSB’s Davis said temperatures during the Jan. 2-7 period will be more than 15 degrees higher than normal — near record highs — in the Northern Plains and about 10-14 degrees higher than normal from the western Great Lakes to Texas to the interior Rockies. “Temps in the far eastern United States will be variable on a day to day basis, but over time, will average out to be within normal levels during the six-day period. As a result, heating needs will be near normal during the next six days in the eastern United States and well below normal in the middle of the country.”

However, Davis said the temperature trends during the second week of January are going to change “dramatically” as “major-league arctic air” moves into the country. “This will, by far, be the most significant intrusion of arctic air into the lower 48 so far this winter; it is much stronger than anything that moved into the United States all of last winter.” He said the arctic air is a portion of the extremely intense air mass that has been positioned in and around Siberia during the last few months. Constantly monitored, the airmass has appeared to be stationary until now, as a rather large portion of it has moved from Siberia to Alaska, northwestern Canada, and regions near the North Pole.

According to Davis, the atmospheric mechanisms are in place to force this arctic air southward into the lower 48, first affecting the Northern Rockies and Northern Plains during the middle of next week as temperatures rapidly drop below zero across Montana and the Dakotas. “Beyond the middle of next week, the arctic air will surge south and east and encompass most of the country by the weekend of January 11-12,” he said. The arctic airmass is expected to impact all areas of the central and eastern United States.

The West Coast is expected to sit out the big freeze because it is currently building a ridge of high pressure that will not allow the cold air to surge into the area.

Looking past the 12-day forecast, Davis said he expects further intrusions of arctic air to plunge into the central and eastern United States. Because of this multiple surge projection, the middle of January is expected to be a very cold period in the central and eastern regions. “We fully expect temps to drop below zero in much of the Central and Northern Plains, Midcontinent, and New England,” Davis said. “Obviously, the middle of January is going to be a timeframe which features very high heating needs from the East Coast to the Rockies.”

New York-based Weather 2000 — which accurately forecast the weather for October through December — agreed last week with the NWS and Davis in predicting that a “sizeable part of the eastern half of the nation that could see below normal temperatures, not only October through December like we already said, but also January, February, March, April and even into May. Generally speaking, we think that east of the Mississippi River has good chances of seeing below normal temperatures going forward,” said Weather 2000’s Michael Schlacter. As for west of the Mississippi, Schlacter said El Nino is going to be playing a larger role.

Following the predictions of much colder weather, the New York Mercantile Exchange reopened with a bang at 7 p.m. EST Wednesday evening as prices rebounded more than a dime off Tuesday’s $4.789 close.

After trading in the $4.90s throughout the overnight Access session, February futures were goosed higher again Thursday morning as more buyers entered the fray. Light profit-taking ahead of Friday’s storage report was seen in the afternoon as February finished at $5.251, up 10% or 46.2 cents for the session.

But not all weather forecasters were in agreement last week. Veteran forecasting firm WSI Corp. said on Friday that the January-March period could turn out to be cooler-than-normal only in the southern tier of the United States and warmer than normal in the northern tier and the West. WSI is forecasting warmer-than-normal temps on average in the first quarter in the Pacific Coast states, northern Rockies and Plains, Great Lakes, Northeast, and Mid Atlantic.

WSI said its latest seasonal forecast will be relatively bearish for midwestern and northeastern power and gas prices. “Above-normal temperatures should keep heating demand, and therefore, gas demand and electric power loads, down in the Great Lakes, Northeast and Plains during January and February,” WSI said in its report. “Traditionally, normals begin to increase during March. Therefore, if temperatures are above-normal during the month, load and prices could drop even more than usual.” The WSI forecast also pointed out that above-normal temperatures in the Pacific Northwest could mean less snow pack and a faster and earlier snowmelt, which could push down spring and summer streamflows, limiting hydropower production during the critical summer months.

Picking your weatherman this winter is becoming more and more like picking horses at the Kentucky Derby. For the near-term, however, the gas market has sided with the more bullish predictions of a colder than normal January with much higher than average heating demand and $5-plus natural gas prices.

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