Natural gas bulls were greeted by a solid gap up last evening in the March contract, which continued running through the morning. However, afternoon model guidance trended a bit less impressive, and on the day the March contract settled just 2.3% higher.
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The March contract was still the strongest on the day with the weather being the clear catalyst for the move higher. In fact, later in the morning selling seemed to be led by later contracts along the strip.
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The move was primarily driven by more bullish weather model guidance over the weekend, as in our Morning Update, we noted a significant move higher in GWDDs relative to Friday's expectations.
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This fit very well with our expectations at the end of last week, as in our Pre-Close Update on Friday we noted that the March contract could rally into the $2.7-$2.75 range and that we should trend colder over the weekend.
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Despite these colder changes, we did see models trend slightly warmer in the Southeast this afternoon, cutting into gas gains. This was seen on recent Climate Prediction Center forecasts this afternoon.
Traders are also bracing for what should be a relatively small withdrawal compared to what we saw the last few weeks, with DTI/TCO reporting their smallest combined draw since the week containing New Year's.
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