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James Hyerczyk

Natural gas futures are trading lower after gapping on the opening. The bearish price action is in reaction to forecasts from over the week-end calling for milder temperatures into the end of the month. Traders are also shrugging off last week’s potentially bullish government storage report that showed a larger than expected draw down.

At 14:03 GMT, March natural gas is trading $1.932, down $0.053 or -2.67%.

According to NatGasWeather, “The weather data trended much warmer over the weekend and continued to trend further warmer overnight. After today’s cold shot across the northern and eastern U.S. exits, mild conditions will return across most of the US by late in the week as high pressure strengthens. Where weather patterns look more bearish than late last week is for the start of February as mild conditions are favored to continue.

The next best chances of more frigid air into the U.S. would be around February 4th. Clearly, the nat gas markets were disappointed by milder trends to push prices under $2.00. But it has helped the balance tightened the past several days with LNG exports hitting new all-time highs and power burns strong and over 30 Bcf on cold early week temperatures.”

Short-Term Weather Outlook

For January 21 to January 27, NatGasWeather says, “A strong cold shot will impact the Midwest & East today with highs of only 0s to 30s for strong national demand, aided by lows of 20s &30s across much of the U.S. Wednesday through Friday as high pressure strengthens.

After today, highs across the southern U.S. will warm into the 50s to 70s, with 30s to 50s across the Great Lakes and Northeast, 10-25 degrees F warmer than normal. It will remain cold across the Northern Plains late in the week for the nation’s only cold spot. The West will see a mix of weather systems with cooling & milder breaks. Overall, strong national demand today, then light thereafter.

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Daily Forecast

The weather is bearish; however, oversold conditions could lead to a surprise short-covering rally. Be prepared for a possible two-sided trade.

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