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James Hyerczyk
Natural Gas

Natural gas futures are edging slightly higher on Tuesday as the market continues to straddle a key short-term technical level, while traders sort out the ever-changing details of the 11- to 15-day weather forecast. The market is also trading inside Friday’s wide range for a second session, which tends to indicate investor indecision and impending volatility.

At 10:20 GMT, November natural gas futures are trading $2.314, up $0.011 or +0.48%.

After the two-day rally late last week, the market has given back more than half of its gains due a shifting weather forecast. A slight uptick in the cash market due to a short-term cold shot helped prevent an even larger loss on Monday.

Futures prices were primarily driven lower by reports that showed weather models moving more toward warmer over the medium 11-15 day range, according to Bespoke Weather Services. However, they did add, there is still the chance of below-normal temperatures this weekend and into early next week although they are expected to miss high demand areas.

Short-Term Weather Outlook (7 Day)

According to NatGasWeather for October 8 to October 14, “A weak cool shot will exit the East today with highs of 60s left in its wake. Temperatures will warm Wednesday through Thursday across the Midwest and Northeast ahead of a stronger cold shot Friday through Sunday where lows will drop into the 30s & 40s. A reinforcing cool shot will follow mid-next week to keep the northern US a touch chilly. However, the southern US from Texas to the Southeast will be very comfortable with highs of 70s & 80s for light demand. The Northwest will be unsettled, while hot over the Southwest. Overall, light national demand through Thursday, then increasing, averaging out to moderate.”


Mid-Term Weather Outlook (11-15 Day)

Bespoke Weather Services said, “The colder air mass is expected to lift back up into Canada thanks to another trough digging into the western United States after the middle of October, allowing anomalous warmer ridging to take shape once again in the eastern third of the nation. The results in forecast demand heading back to below-normal levels starting around the middle of next week, very different from the picture seen last year at this time.”

“This places the weather factor on the bearish side of the spectrum after a few model ‘scares’ in the colder direction late last week,” Bespoke chief meteorologist Brian Lovern said.

Daily Forecast

Traders should continue to monitor the price action at the $2.302 level. This represents 50% of the minor range. Trader reaction to this level should set the tone of the market on Tuesday.

With the 11 to 15 day forecast leaning on the bearish side, according to Bespoke Weather Services, we could see pressure emerge on a trade through $2.302.

Traders may be waiting for other weather forecasters to change their predictions to bearish, which may be why the market is still straddling $2.302.

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