Friday, January 11, 2019 at 4:19PM
After what was a relatively slow week for natural gas prices, the February gas contract finally shot higher as all model guidance increased the intensity of cold in the final third of January. The contract logged an over 4% gain into the settle and continued higher sitting now up more than 6% on the day. It was actually the March contract that eked out the largest gain on the day, with the February contract taking the lead post-settle but the entire strip rallying. This is exactly the rally we had been warning clients about all week was possible once weather cooperated, as we outlined that we expected bullish weather trends this week and held a "Slightly Bullish" weekly natural gas sentiment. In our Afternoon Update yesterday we highlighted that our Slightly Bullish sentiment would continue into the day as we expect the dip yesterday afternoon under $3 would be brief, and in our discussion we said that "...with supportive model guidance $3.1 is in play tomorrow and/or early next week..." Finally, this morning in our Morning Update we reiterated that both $3.1 and $3.25 were in play into early next week, and we expected a rally today on overnight GWDD forecasts that held yesterday's colder trends. We also outlined that 12z models and Week 3 forecasts were likely to turn more bullish today. All this verified well with American and European model guidance showing very significant Week 2 cold risks this afternoon that shot gas prices through resistance. It started with American guidance, which showed very significant cold Days 12-16 (images courtesy of Tropical Tidbits). The Climate Prediction Center picked up on this too, increasing Week 2 cold risks in their latest forecast this afternoon. Their afternoon update also showed that cold was likely to linger in the East through Weeks 3-4. This was the main focus of the Pre-Close Update that we just sent out to subscribers, as it outlined our expectations for how weather model guidance trends over the coming weekend and how that can impact natural gas prices. We outlined our thoughts on whether the cold on afternoon model guidance would stick around, then highlighted gas price risk next week and a couple target levels we are looking at. We addressed the recent trends in the cash market and daily supply/demand balance changes that have influenced prices as well, ending with a brief look at contract spreads. To give this report a look, and begin receiving all our highly detailed weather and natural gas analysis which can keep you one step ahead of the market, try out a 10-day free trial here.