A major colder shift from weather models over the weekend had natural gas futures soaring in early trading Monday, though forecasters wondered about the durability of the pattern change. The November Nymex contract was up 35.7 cents to $5.637/MMBtu at around 8:50 a.m. ET.
Compared to Friday’s expectations, the latest model runs advertised a “material shift colder,” a result of a “high-latitude blocking configuration” favorable to chillier temperatures finding their way into the Lower 48, according to Bespoke Weather Services.
The firm observed colder changes to the temperature outlook for the eastern half of the nation both for the current week and next week, resulting in an increase of 10 gas-weighted degree days (GWDD) overall for the next two weeks.
“Fifteen-day GWDD are close to the five-year normal, but this is still quite a step change in the pattern compared to how warm we have been, and there is risk that some of these days shift a little colder yet,” Bespoke said. Still, the “models look more tame out to days 14-15, so it is not yet clear this is a sustained change.”
The colder trends in the forecast had “reinvigorated” the November contract early Monday even as the temperature outlook remained “hardly extremely bullish by conventional metrics,” analysts at EBW Analytics Group observed.
The shift “appears to indicate a more lasting pattern change away from the record warmth of recent weeks as the Gulf of Alaska low is dislodged,” the EBW analysts said. “Over the next 10 days, daily heating demand may double.”
Also supporting prices early Monday was an uptick in liquefied natural gas feed demand resulting from higher flows to the Sabine Pass and Freeport terminals, according to the firm.
“November contract options expiration and final settlement could amplify volatility in the days ahead,” the EBW analysts said. “If the cold outlook strengthens, more gains are possible for Nymex gas.”
Bespoke similarly noted that contract expiration has had a tendency to produce rallies in the market “independent of other variables” that could influence prices.
“With that in mind, should the colder shift continue toward expiration, we would not be surprised to see $6 again,” Bespoke said. “…Having rallied strongly already, we are back neutral for now, but eyes will be on every model run.”
December crude oil futures were up $1.11 to $84.87/bbl at around 8:50 a.m. ET.
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