Wednesday, January 09, 2019 at 4:19PM
The February natural gas contract logged another small gain today, ticking higher by about half a percent as forecasts continued to trend slightly colder later in January. Like yesterday, the March contract was the weakest on the day while we saw significant support from later 2019 contracts with production still off highs. Accordingly, the March/April H/J spread continues to tick on lower. This came despite some colder trends in long-range forecasts, as shown by the arrival of Week 2 cold risks and far fewer warm risks on Climate Prediction Center forecasts this afternoon. Our Morning Update reiterated that these trends were likely, as we held a "Slightly Bullish" sentiment for the day and highlighted that Week 3 trends were likely to be bullish with 12z weather model guidance likely to add GWDDs. Meanwhile, long-range CFSv2 climate guidance, which typically is warm-biased, is showing modest cold risks across the East Weeks 3-4 as well. Traders are weighing these weather trends against expectations for tomorrow's EIA print, where we expect a decently larger than last week (but still loose) storage draw to be announced. Gas Weighted Degree Days were decently below average last week, so this should not be a surprise. In our Afternoon Update we sum this all up, explaining our estimate for tomorrow's EIA print as well as how we see weather model guidance trending after some colder risks on 12z runs. We similarly delve into the latest spread action and balances in the gas market, which we use to determine how prices likely react to misses in either direction with tomorrow's EIA number. Try out a 10-day free trial here to give it a look.