Monday, October 07, 2019 at 5:17PM
Various weather model runs late last week hinted at a potential pattern change to a colder regime, giving some life to natural gas prices in the wake of Thursday's EIA report. The prompt month November contract at one point had moved nearly 20 cents off its Thursday intra-day low. But over the weekend, odds of a sustainable colder pattern took a hit, as models shifted toward a warmer pattern once again by the 20th. There is still a cold shot focused in the middle of the U.S. late this week into the early part of next week, but it is expected to lift out rather quickly. The reason for the change lies in a big shift in the projected pattern on the Pacific side of the pattern. Here is what the 12-16 day upper air forecast from the GFS-Ensemble looked like 3 days ago: Notice the low heights (blue colors) back near the Aleutians, and a downstream warm ridge over the West, which pushes a colder trough into the eastern U.S. Now let's look at the same model's forecast from today, valid the same dates: As you can see, that is a very different look compared to the prior image, with a cooler trough now in the West, which allows the East to warm back up. After a bump up in demand centered on this weekend, forecast GWDDs drop off quickly again thereafter. This lack of durability in any colder pattern helped send natural gas prices back lower today, with the November contract closing nearly 5 cents lower on the day. We recognize that it is still early for weather to be the primary driver of price action, but in this particular case, it is applicable, given that there has been no major change in the supply / demand balance as of yet, so it stands to reason that lower risks of cold when compared to weather models back on Friday can have a market impact. Which way will the natural gas market move next? Sign up for a 10-day free trial here and take a look at what our blend of weather and fundamentals research suggests.