Friday, November 09, 2018 at 5:12PM
The December natural gas contract shot another 5% higher today as physical prices soared off an incoming cold shot and overnight models once again increased medium-range cold risks. Like yesterday, the largest gains were all at the front of the strip, with cash an initial catalyst to break through a number of resistance levels. This cash strength was not particularly surprising, as in our Afternoon Update yesterday we highlighted that, "This recent range from $3.45-$3.6 is much of the reason our sentiment has remained neutral all week as we have not seen a clear catalyst to break out of it. That may be changing, however, as tomorrow we are looking for even stronger cash prices out of Henry Hub and any sustained medium-range HDD additions to potentially move the front of the strip at least into if not briefly above the $3.6 level. We had looked for this earlier in the week as well but cash prices did not exude enough strength to make it possible; stronger cash today and very significant cold this weekend make a morning bounce tomorrow off cash strength more likely." At the time we were looking for that bounce to fail, but did predict a morning bounce. Our Morning Text Message Alert reiterated to clients that upside was likely today. Then our Morning Update turned our sentiment "Slightly Bullish" as we expected the front of the natural gas strip to run towards the $3.7 level with colder overnight weather model trends. Admittedly we were not quite bullish enough, with prices shooting higher over $3.28, though they did come back down to settle near that $3.27 level as well. The market is clearly very sensitive to weather, and we can see that GWDDs near the highest levels of the past 35 years into mid-November are clearly spooking traders. Yet some long-range warm risks did persist that helped reversed prices later in the day today. These are seen on the latest 8-14 Day Climate Prediction Center forecast. Their Week 3-4 forecast featured even more warmth. In our Pre-Close Update we ran through our thoughts on the long-range pattern as well as how weather models were most likely to adjust through the coming weekend. We also touched on the latest balances in the gas market and accordingly how price risk appeared skewed into next week. To give the report a look, and begin receiving all our highly detailed weather and natural gas analysis, try out a 10-day free trial here.