Natural Gas Price Fundamental Daily Forecast – Traders Eyeing Early January Cold Front

Natural gas futures edged higher on Monday on forecasts for colder weather and higher heating demand over the next two weeks. The technical chart pattern also looks potentially bullish after forming a support base since December 6. It suggests the possibility of a short-term breakout over $3.964 into at least $4.378. However, any rally will be weather-dependent.

At 21:14 GMT, March natural gas futures are trading $3.767, up $0.253 or +7.20%.

Front-month gas futures put in a more impressive performance, rising 32.9 cents, or 8.8%, to settle at $4.060 per million British thermal units (mmBtu), their highest close since December 3.

Heating Degree Days Rise But Not Enough to Fuel Long-Term Rally

Data provider Refinitiv estimated 420 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, up from 402 HDDs estimated on Friday. The normal is 437 HDDs for this time of year.

HDDs, used to estimate demand to heat homes and businesses, measure the number of degrees a day’s average temperature is below 65 Fahrenheit (18 Celsius).

The rise in HDDs suggests demand will be rising over the near-term.

Refinitiv projected average U.S. gas demand, including exports, would jump from 110.0 billion cubic feet per day (bcfd) this week to 126.7 bcfd next week as the weather turns seasonally colder.

Shorts Cover, Specs Buy on Weather Concerns

Prices jumped higher on the opening on Monday, boosted by a “frosty pattern” into the first 10 days of January, according to NatGasWeather.

However, in overnight runs ahead of Monday’s session, both the American and European modeling showed significant declines in heating degree days by “seeing not quite as much cold air into the northern U.S.,” the firm said.

“There are still bouts of strong demand expected” between New Year’s Day and January 10, but cold during this time frame is “simply not quite as impressive after the overnight data trended warmer with it.”

Bespoke Weather Services in its latest forecast early Monday noted continued warmer trends in the near term compared to previous expectations.

Models suggested “any threat of meaningful cold on the national level” would not show up until “after the turn of the new year,” Bespoke said. “While it has been tiring to use the same line of cold failing to progress forward, we do still see reasons to believe in some colder risks into at least the first half of January.”

Short-Term Outlook

Monday’s strong showing was driven by colder weather model runs. The weather will be the main focus for traders over the short-run.

Natural gas futures will be highly dependent on this cold weather pattern for the first 10-days of January. If lingering cold pushes in from Canada during this time period, prices have a chance to breakout to the upside. If the cold doesn’t show up, then sellers will return.