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James Hyerczyk
Natural Gas

The bulls that drove natural gas prices sharply higher on Thursday, turned into bears overnight as prices are plunging early Friday, setting up for a weaker regular session in New York. Yesterday, prices soared as demand re-emerged in the latest European weather models, however, today’s early price action suggests this demand may have been erased in the overnight American and/or European weather forecasts.

At 10:42 GMT, February natural gas is trading $2.253, down $0.067 or -2.89%.

Weather Outlook

Natural Gas Intelligence (NGI) said on Thursday, “After some major flips back and forth in the American Global Forecast System (GFS) weather model, traders had been waiting for more clarity from the more-trusted European model. After adding 11 heating degree days (HDD) overnight, the model gained another 5 HDDs in its afternoon run Thursday.”

“Bulls will likely be satisfied to see demand added in the latest European model, but it would simply look much more bullish if the 11- to 15-day forecast wasn’t so bearish,” NatGasWeather said. “The overnight data will be important to see what weather trends it shows ahead of what looks to be another dangerous weekend to hold.”

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U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural as fell by 73 billion cubic feet for the week-ending December 6. Analysts were looking for a 74 billion cubic feet drawdown, on average.

Total stocks now stand at 3.518 trillion cubic feet, up 593 billion cubic feet from a year ago, but 14 billion cubic feet below the five-year average, the government said.

Daily Forecast

The volatile flip-flop in the natural gas market from Thursday to Friday can only mean one thing, be prepared for another gap opening on Monday.

Obviously something changed in the forecasts overnight that triggered a selling response from some major players. Since the European model had been adding heating degree days the past two session, my best guess is that it reintroduced warmer temperatures into the picture.

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