Weather models show ‘solidly bullish’ temperatures ahead of Christmas as natural gas futures rise | Bot To News

With forecasts over the weekend pointing to a frigid weather pattern in the lower 48s developing by the end of the week, and with models raising the possibility of colder weather to close out 2022, natural gas futures They rallied sharply in early trading on Monday.

The January Nymex contract was up 62.7 cents at $6.872/MMBtu around 8:50 am ET. February rose 56.7 cents to $6,649.

The US weather model saw a significant cold shift over the weekend, bringing it into better agreement with the colder European model outlook, according to NatGasWeather.

Both models announced a “solidly bullish” temperature outlook starting Saturday and extending through the Christmas holidays, the firm said.

“Weather data over the weekend contained a series of freezing cold moving from western Canada into the US.” during this time period, resulting in cold low temperatures and strong demand for natural gas nationwide, NatGasWeather said. “What makes the pattern strongly bullish” is the end of the weather pattern causing Canadian cold air to continue moving into the lower 48, “suggesting strong domestic demand will last through the end of the month.”

Still, “traders should be careful” amid the recent inconsistency in weather data, the firm said. The models “could return numerous” heating degree days over the next few runs, which means that “each new set of weather data will need to be closely monitored” given the potential for “violent swings depending on warmer or colder trends.” added NatGasWeather.

The weekend weather model trends may have done enough to overcome doubts in the market related to the performance of the previous model, according to EBW Analytics Group analyst Eli Rubin.

“After the model collapse of the previous weekend, the gas market became concerned about the cold advance of the model,” Rubin said. However, degree day gains over the weekend “convinced the market that a cold snap was coming.”

On the other hand, mild temperatures are expected in the short term, and Lower 48 storage is on track to reach a surplus to the five-year average of more than 50 Bcf by mid-December, according to EBW estimates.

“The nearly 1.4 Tcf in March outflow storage will provide a noticeable buffer unless extreme cold persists through the winter,” Rubin said. “While more upside is possible in the near term, there will likely be some downside pressure on gas after the market gets to see through the cold weather ahead.”

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