Over the last few months, natural gas prices have been mostly on a one way train upward, reaching levels not seen since the "polar vortex" winter of 2013-14. This has occurred regardless of the weather pattern. Case in point: We have seen an incredibly low demand period recently, with very warm weather especially in the northern half of the U.S, where we typically begin seeing HDDs at this time of the year.

In fact, taking what we have seen, and combining it with the morning forecast, projected demand for the month as a whole, measured by Gas-Weighted Degree Days (GWDDs) would be the lowest of any October since 1980, even lower than October 2016.

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Now, October obviously is not the most crucial month of the year for the natural gas market, but any time there are extremes like this, it matters. End-of-season storage projections have indeed risen considerably over the last few weeks, but prices remain quite elevated, still sitting above the $5.50 level, thanks to other factors.

As we move forward, weather, including individual model runs, will become much more influential in moving prices. This typically begins to occur around the middle of October, and we are seeing signs that it is beginning right now. Prices today had been "red" on the day leading up to the midday model runs, down under the $5.40 level. The midday models came out, and unanimously agreed on cooler changes, adding GWDDs to the forecast.

The forecast had not moved "cold", by any means, but it was a step change toward something closer to normal in the medium range, driven by more of a high-latitude blocking pattern, and more cooler upper-level troughing seen in the central and eastern U.S.

For example, here are the GEFS 6 to 10-day upper air changes:

And the 11 to 15-day changes:

With the market being on-edge given the upside price risks in the event we see strong cold this winter and would need to compete with astronomical global prices to price out LNG, even this change was enough to send prices much higher. Here is the price chart from just prior to the first midday model run, the GFS operational, to the end of electronic trading.

In that there was no other data / news during this time frame, it is highly likely that the move was driven by the change in those weather models, taking prices more than 25 cents higher. This is solid evidence that we are beginning the time when "weather trading" will be prevalent in the natural gas market, and with volatility at very high levels, moves off weather forecasts and individual model runs can, and likely will, frequently be very significant.