Natural Gas Price Fundamental Daily Forecast – Cold European Model Outlook Fueling Price Surge

Natural gas futures are attempting to breakout to the upside at the mid-session on Monday after a bullish shift in the forecasts over the weekend increased the chances of upcoming cold hitting high demand areas in the United States.

At 17:29 GMT, March natural gas futures are trading $2.827, up $0.263 or +10.26%.

Weather Models Shift toward Cold

Over the weekend weather models increased demand expectations by showing upcoming cold temperatures traveling further east, Wood Mackenzie analyst Dan Spangler said in a note to clients early Monday.

Natural Gas Intelligence (NGI) reported that compared to Friday’s projections, the latest model runs added around 18 heating degrees days to the outlook, with the increased demand “driven by the population heavy East and Midwest regions,” Spangler said. “The unseasonably cold weather is expected to arrive this weekend and stick around through next week…The polar blast could mark some of the coldest temperatures seen this winter in much of the U.S.”

Bespoke Weather Services said it added to more than 20 gas-weighted degree days to its official forecast based on the colder shift in guidance over the weekend.

“The main source of the change is a much stronger” negative North Atlantic Oscillation block, Bespoke said. “As a result, the cold that dumps into the nation this weekend is unable to lift out quickly, getting stuck longer in the Midwest to East.”

“When considering that the selloff Friday seemed overdone even before these changes, the recipe was there for a large move, and it may not be finished yet, as there is potential for additional cold around the middle of the month, though location is unclear,” Bespoke said.

Short-Term Outlook

NatGasWeather said, “The weekend weather data had the GFS lose 7-8 HDD’s but the European model gain a massive 33 HDD’s on much colder trends. The overnight GFS gained a minor 5 HDD’s but again wasn’t looking nearly as cold as the EC after the EC trended further colder February 10-15.

Both the GFS and EC trended colder with a frigid cold shot into the U.S. this weekend but the GFS had a mild ridge follow over the southern and eastern U.S. February 10-12 for lighter demand. The EC sees another frigid cold blast follow February 10-12 and is much colder.

The early morning 6 GFS did finally catch on to what the EC was seeing by gaining a hefty 30 HDD’s on a stronger cold shot February 10-12. Essentially, big colder trends over the weekend compared to Friday’s data, especially in the EC, which now shows the coldest pattern so far this winter the next couple weeks.”

The key level to watch into the close on Monday is the main 50% price at $2.794.

Look for a bullish tone into the close on a sustained move over $2.794 with the Fibonacci level at $2.918 the next likely target. This is also a potential trigger point for an acceleration to the upside.

A sustained move under $2.794 will be an early sign of weakness, perhaps caused by a late change in the weather pattern.

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