Nat Gas Lower Amid Drop in Weekend Weather Driven Demand

Natural gas futures are trading lower on Monday after gapping down on the opening. The catalyst behind the early selling pressure is the significant weakening in the weather driven demand outlook over the weekend.

At 14:12 GMT, March natural gas futures are trading $4.333, down $0.239 or -5.23%.

Bespoke Sees Warming Trend

Natural Gas Intelligence (NGI) is reporting the weather outlook “jumped notably to the warmer side” over the weekend, with both the American and European modeling advertising the change, according to Bespoke Weather Services.

“The main culprit is a shift toward a less favorable pattern on the Pacific side for delivery of cold air, something we had been watching for given the changes in the projected tropical patterns, but it took longer for models to resolve this connection than expected,” Bespoke said in a note to clients early Monday.

The latest 15-day forecast leaned warmer than normal overall, according to the firm.

The pattern “could evolve even warmer” heading into the final week of February, “with any colder risks moving more into the western half of the nation, more consistent with a typical La Nina base state,” Bespoke said. “Recent model volatility keeps confidence at average, though our lean is that this directional change is correct.”

NatGasWeather Predicts Gradually Lighter National Demand

According to NatGasWeather for February 7-13, “National demand will remain strong through the weekend as an Arctic blast lingers over Texas and the South with frigid lows of 0 to 30s, while dangerously cold over the Midwest and Ohio Valley with lows of -20s to 10s.

The Arctic front will gradually advance into the East while fizzling in strength but still impressively cold and with areas of rain and snow.

A mild break is expected over much of the U.S. Tuesday-Friday of next week with highs of 40s to 70s for lighter national demand besides near the Canadian border where it will remain colder.

Overall, national demand will be easing to moderate this week after being high-very high last week.”

Daily Forecast

Bullish traders are hoping for hefty withdrawals and potential new record highs for liquefied natural gas (LNG) exports to stop the current price slide. Technically, the retracement zone at $4.378 to $3.964 could be the area that stops the selling, but it’s a wide range. This typically means it could take days to form a support base.

On the other hand, the selling pressure could even continue until the market finds a value area which is inside $3.629 – $3.416. The factors that could drive prices even lower from current levels are the bearish weather shift and an expected production rebound.