Looser EIA Print And Warmer Models Reverse Natural Gas Rally

January natural gas price started out the day shooting higher, as overnight models increased long-range cold risks. This morning we highlighted that $4.25 was likely to be tested on overnight long-range GWDD additions. 

natural gas commodity weather

That test came quickly this morning, but the EIA announced that only 77 bcf of natural gas was drawn from storage last week versus our estimate of 82 bcf, hitting prices lower. 

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natural gas commodity weather

Immediately in our EIA Rapid Release we warned that, given recent balance and weather trends, we saw this EIA report as slightly bearish for natural gas prices moving forward. 

Sure enough, natural gas prices quickly reversed lower through the day, with the January contract actually settling down slightly on the day. 

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natural gas commodity weather

The March contract ended up being the only one to log a slight gain. 

natural gas commodity weather

The result was another move lower in the January/March contract spread, though the move was not nearly as large as some of the other ones we have been more accustomed to seeing. 

(Click on image to enlarge)

natural gas commodity weather

Prices were further depressed by afternoon model guidance that did not show nearly as many long-range cold risks. Climate Prediction Center forecasts did show fewer warm risks in Week 2, but still do not show any cold risks even as models last week showed cold could be returning by Christmas-time. 

natural gas commodity weather

It was clear that this combination of bearish weather models and a slightly looser EIA print hurt natural gas prices, as we saw this print come in slightly looser than last week's on a weather-adjusted basis. 

natural gas commodity weather

Traders now will be preparing for another weekend of weather changes, managing risk before this two-day trading halt where we can again expect decent weather model noise and changes.

Disclaimer: To begin receiving both our technical and fundamental analysis of the natural gas market on a daily basis, and view our various models breaking down weather by natural gas demand ...

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