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James Hyerczyk
Natural Gas

Natural gas futures are edging higher early Tuesday after posting a dramatic reversal to the upside the previous session in response to reports of the return of a “polar vortex” in the northern hemisphere later in the month.

Prices slipped early Monday after an uneventful weekend as forecasts continued to call for mild temperatures and diminished heating demand. However, prices turned around and finished higher for the session after midday reports surfaced calling for a late-month surge in frigid temperatures.

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At 09:13 GMT, March natural gas futures are trading $2.770, up $0.067 or +2.48%.

In other news, LNG volumes, while steadily strong, dipped below 11 Bcf over the weekend and into Monday after hovering above that near-record threshold over several days last week, NGI data show.

NGI also reported that cash prices declined across the country on Monday as temperatures climbed over most of the Lower 48. However, the shift in the polar vortex and an anticipated return to winter norms beginning next week could prove to be a catalyst for higher cash prices later in January.

Short-Term Weather Outlook

According to NatGasWeather for January 12-18, “One weather system will exit the Southeast today with showers ending, while a second wetter system brings heavy rains to the Northwest. With much of the rest of the U.S. experiencing mild highs of 40s to 70 beside 30s for the far northern U.S., national demand will be light Tuesday – Friday. Demand will moderately increase this weekend as a weather system/cold shot sweeps across the Midwest/Great Lakes and extends to the Southeast with showers, although countered by warmer than normal temperatures over the West, Texas, and South.”

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Polar Vortex Deep Freeze to Threaten US and Europe

National Weather Service meteorologists said a harsh winter chill could blanket large swaths of the country near the end of January. They pointed to the potential for a polar vortex – a cold snap that develops in the atmosphere above the North Pole and sends harsh blasts of freezing temperatures throughout the Northern Hemisphere. This would drop temperatures in North America as well as Europe and Asia, key destinations for U.S. liquefied natural gas (LNG) exports.

Daily March Natural Gas

Daily Forecast

According to Bloomberg, “High in the atmosphere above the North Pole, a spike in temperatures may soon send bone-rattling chills spilling down through the Northern Hemisphere.”

“The icy blasts threatening to sweep across North America, Europe and Asia starting in late January are from the same weather pattern that triggered the 2014 cold snap known as the polar vortex, which plunged temperatures in Chicago to minus 16 degrees Fahrenheit (minus 27 Celsius).

Monday’s dramatic reversal to the upside and the change in trend suggest that bullish traders are already preparing for the cold. The only obstacle in the way is a 50% to 61.8% retracement zone at $2.794 to $2.918.

It’s a wide range to overcome, but if aggressive speculators are successful in taking out $2.918, the daily chart indicates there is room to the upside to run with $3.320 reasonable upside target.

For a look at all of today’s economic events, check out our economic calendar.

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