Natural Gas Price Fundamental Daily Forecast – Modest Cold Shift Could Fuel Short-Covering that Fills Gap

Natural gas futures are inching higher on Wednesday as a few shorts trim positions following Monday’s steep break on forecasts calling for a cold blast to hit the New England region. Despite the short-term outlook, gains are being capped by persistently warm December temperatures.

At 12:21 GMT, January natural gas is trading $3.852, up $0.144 or +3.88%.

Natural Gas Intelligence (NGI) reported that spot gas prices also strengthened on a blast of cold weather heading toward the Northeast, particularly in the pipeline-constrained New England region. NGI’s Spot Gas National Average rose 60.0 cents to $4.560.

Bespoke Weather Services:  On Pace for Second Warmest December on Record

Bespoke Weather Services said the latest forecast had done little to change the narrative over the next couple of weeks, at least. Conditions remain locked in a warm state and are still on pace to result in the second warmest December on record, behind only December 2015.

“That said, there are still some things we are watching that could bring changes toward the end of the month, starting around the holiday period,” Bespoke said.

The changes would not instantly change the pattern, according to the forecaster, but would be a key first step in at least denting the high-end warmth. “These trends will be watched very closely in the coming days to see if it gains traction, or is simply another “false alarm’” Bespoke said.

Short-Term Weather Outlook

According to NatGasWeather for December 8-14, “A cold shot lingers across the Midwest and Northeast this morning with lows of -0 to 30s, highs of 30s to 40s for strong national demand, although warming in the days ahead into the 50s and 60s as upper high pressure builds in, including highs near 70 degrees Fahrenheit to New York City by Saturday.

The southern U.S. will be nice to warm with highs of 60s to 80s for very light demand. The Northwest will be the nation’s only cool region this weekend and next week as weather systems bring rain, snow, and highs of 10s to 40s, lows of 0s to 30s.

Overall, national demand will be moderate today into Wednesday, then low-very low after.”

Daily Forecast

Besides the weather, natural gas traders are also paying close attention to rising prices in Europe. On Tuesday, European gas prices spiked 6%, helping to underpin U.S. prices.

According to Maxar’s Weather Desk, warmer weather was expected to the next six to 10 days, but conditions could change later in the month. Rystad Energy said, if storage is depleted at a rate similar to the five-year average, Europe could end winter with natural gas inventories at only 21% of capacity. This would be bullish for U.S. liquefied natural gas (LNG) exports.

Technically, prices appear to have stabilized after Monday’s gap, but the bears are still in control. If weak shorts are forced to cover then traders could fill the gap up to $4.042 with additional resistance coming in at $4.283.