James Hyerczyk
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Natural Gas

Natural gas futures are trading lower at the midsession on Wednesday as hopes for an extreme cold snap fade with every new weather forecast calling for milder trends over the near-term.

The early pressure was fueled by the European model, which trended milder, putting it about 10-12 heating degree days warmer compared to previous runs over the past 24 hours, NatGasWeather said on Wednesday.

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At 14:54 GMT, March natural gas futures are trading $2.477, down $0.052 or -2.06%.

NatGasWeather also said the American model added demand overnight, “but the European had been colder, and the natural gas markets were likely hoping the frostier scenario would come through,” the firm said. “Not to be the case, as the weather data disappoints yet again, as it’s done in almost all instances the past two winters.”

There’s still a “decent” amount of national demand expected starting this weekend through January 29, NatGasWeather said.

“However, the natural gas markets were clearly hoping for frigid air over Western Canada to push more aggressively across the Midwest and Northeast instead of only modest cold shots arriving,” according to the firm. “Also at issue, the pattern is now quite bearish for February 1-3 as warm upper high pressure builds over most of the U.S. besides the West Coast and far East for light national demand.”

Short-Term Weather Outlook

According to NatGasWeather for January 20 to January 26, “A cold shot will track across the Great Lakes and interior Northeast today with chilly highs of 20s & 30s. Most of the rest of the U.S. will be mild with highs of 40s to 60s for light national demand. Colder weather systems will push into the West and Northern Plains with rain and snow late this week with lows of -10s to 30s, then spreading across the rest of the northern U.S. this weekend for a swing to strong national demand.”

Daily March Natural Gas

Short-Term Outlook

Thursday’s U.S. Energy Information Administration (EIA) Weekly Storage report is likely to be a non-event because the data represents conditions for the week-ending January 15 and traders are focusing on next week’s heating demand and the possibility of bearish weather for February 1 – 3.

There’s still a shot at some decent demand next week, but it’s only supposed to be a spike lower in temperatures rather than a lingering cold spell. That’s not enough to wake up the bull.

The daily chart pattern suggests the bearish tone is likely to continue on a sustained move under $2.485, but we could see a short-covering surge if buyers can recover $2.552 with conviction.

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

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