Nat Gas Jumps as Models Predict Lingering Cold Until Feb 7

Natural gas futures spiked to their highest level since November 26 on Friday as European weather models put increasing cold into their overnight forecasts. The news triggered a technical breakout on the daily chart, which was likely fueled by a combination of short-covering and aggressive speculative buying.

At 14:53 GMT, March natural gas futures are trading $4.800, up $0.517 or +12.07%.

Bespoke Weather Comments

According to Bespoke Weather Services, the European weather model underwent “another sizable colder change” overnight that brought it into better agreement with the chillier outlook from the American modeling.

“We have discussed previously how forcing signals did not seem to suggest a continued sustainable cold pattern beyond the first few days of February, but so far that idea simply is not working out,” Bespoke said. “What we see of the opening third of February looks quite cold in all of the major guidance.”

NatGasWeather Remarks

“The overnight data was mixed with the GFS shedding 9 HDDs, mainly on warmer trends February 8-11, while the EC gained 5-6 HDDs on colder trends February 3-7, although also was warmer February 8-11.

To the bullish side is a strong winter system over the East this weekend, including subfreezing temperatures deep in the Southeast. After a brief break nearly next week, another frigid cold shot is expected to sweep across the northern, central and eastern U.S., including another round of frosty temperatures into Texas and the South, while frigid over the Midwest to Ohio Valley with lows of -20s to 20s for strong/very strong national demand.

The pattern would be more bullish if it wasn’t for warmer trends in the overnight data for February 9-11 as a warm break sets up over the southern and eastern U.S.

Make no mistake, the coming pattern is still bullish, it would just be even more so if the 13-16 day forecast period was colder.”

Short-Term Outlook

Natural gas is likely to rise until traders can fully price in the demand expected from February 3 -7. Prices could then pullback but remain supported until traders can assess the forecasts for February 8 -11.

If the forecasts for February 8 -11 show the continuation of colder temperatures then look for another surge to the upside.

Any extreme cold beyond February 11 could drive storage below acceptable levels.