January natural gas futures were trading 15.4 cents lower at $3.673/MMBtu shortly before 9 a.m. ET Monday as forecasters pointed to weekend guidance showing more intense cold unlikely to arrive until around New Year’s Day at the earliest.
NatGasWeather said weather data over the weekend continued to show a bearish pattern through Dec. 28-29, with the Global Forecast System dropping about 23 Bcf of projected demand compared to Friday to better align with milder European guidance.
“Over the next 15 days, there will still be weather systems with rain and snow, as well as occasional cold shots across the northern U.S.,” the forecaster said. “However, the main issue remains where the frigid cold pool over Canada won’t get tapped effectively by U.S. weather systems, keeping lighter than normal national demand in place.
“As such, the natural gas markets will need to wait until around the start of the new year for the next opportunity for more impressive cold to arrive across the northern U.S., which the latest Sunday data teases. But this would require more convincing evidence considering it’s at the far end of the 15-day forecast.”
Bespoke Weather Services said conditions leading to below average gas-weighted degree days are “likely to dominate” through the end of the month.
“We do see the forecast marginally cooler later in Week 2 as the western half of the country could see some weak cold air dive down, but the source region for any cold appears unimpressive and most model guidance has weak ridging maintain in the East as well, which can keep temperatures above average,” Bespoke said. “Much of this is thanks to tropical forcing stalling across the Maritime Continent the next two weeks, which can keep the East warmer.
“This will gradually break down Week 3 into Week 4 as cold should return to the East through the first half of January, though it will take time and at least for now the endings of model runs still do not show any kind of rapid transition back to significant cold.”
The coming warmth should “significantly ease storage concerns” as the next four Energy Information Administration storage withdrawals are likely to come in below the five-year average, the firm said.
“We do not see much reason yet for prices to move much below $3.75, and would look for $3.50 to be firm, as below there we can see burns begin to rapidly tighten,” Bespoke said.
Looking at the technicals, after the January contract broke below support at $3.975 last week, analysts with Rafferty Commodities Group said Monday they’re looking for more follow through to the downside.
Heading into Monday’s trading, the firm pegged major support levels at $3.730, $3.600 and $3.510.
“Below these levels is support at $3.483, which is the value of the upward sloping line” of the recent consolidation pattern in the weekly chart, the Rafferty analysts said. “While we still believe that the market will rebound to test some of our resistance levels, the better risk/reward for now is buying against these major support levels risking a close below them.”
January crude oil was trading 9 cents higher at $51.29/bbl shortly before 9 a.m. ET, while January RBOB gasoline was up fractionally to $1.4437/gal.
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