Despite Volatility, January Gas Ends Week Flat

It was another wild week in the natural gas space, with prices gapping down and plunging Monday before shooting back higher Tuesday and falling Wednesday into Thursday. We then shot higher again today before a warmer European ensemble model run pulled prices lower into the settle where we are set to go into the electronic close right in the middle of the weekly range. 

Price settled on the highs for the day, though, and the result was actually a week that was basically flat for the January and February contracts. 

More weakness in the March contract meant that the January/March F/H contract spread settled near its highs for the week too. 

Generally, trading through the week fit our expectations. When prices were off significantly on Monday we highlighted that our Weekly Sentiment was still neutral as prices could test $3.5 but that early in the week prices should set a bottom with more impressive cold risks on model guidance later in the week likely allowing prices to bounce. 
 

This verified well as weather models trended colder through the week for early January, with forecasts in our Morning Update today showing much of Week 2 with GWDDs around to slightly above average. 

Yet we were cautious all week, warning that model guidance can still trend warmer into the end of December and that models can sometimes rush these colder changes as we highlighted in that Monday Report. 

This led to the overall Neutral sentiment, which we held into our Morning Update today while also explaining that "...risk increasing looks to be skewed upwards from these levels..." as "Under $3.75 gas seems relatively cheap." Sure enough, prices bounced through the day to settle above that level, but noted model volatility was enough to keep prices in check post-settle and verify our daily Neutral sentiment with Week 3 forecasts ticking a bit more bearish. 

We saw these mixed risks on Climate Prediction Center forecasts this afternoon too which kept some warmth across the East but showed a bit more cold risks in the center of the country. 

We expect choppy trading next week with low volume on a half day Monday for the Christmas Holiday. But traders will be closely watching the latest weather developments in the first half of January while also awaiting Friday's delayed EIA print, which will demonstrate just how much the market has loosened in warmth through the past week.