Natural Gas Volatility Isn't Going Anywhere

It was another very volatile day in the natural gas space, as prices gapped up decently last evening, sold-off through the morning, spiked on cold risks in American model guidance mid-day and then sold-off hard into the settle. After all this the January contract settled up 1.3% on the day. 

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natural gas commodity weather

The January contract was the only one to log a gain on the day; the rest of the strip logged a small loss. 

natural gas commodity weather

The result was a decent tick back up in the F/H January/March spread following major declines last week. 

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natural gas commodity weather

These changes came as traders struggled to determine how best to react to weekend weather trends. This morning, 15-day Gas Weighted Degree Day forecasts were quite similar to what we forecast on Friday. 

natural gas commodity weather

In fact, we noted that 6-10 and 8-14 Day forecasts were almost exactly what we had predicted on Friday. 

natural gas commodity weather

Yet though the weather analysis was right and prices did initially sell off this morning on "Slightly Bearish" weather trends, that did not last long. 

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natural gas commodity weather

Cold risks remained on long-range GEFS American weather model guidance, which helped spike gas prices mid-day (images courtesy of Tropical Tidbits). 

natural gas commodity weather

Medium-range warm risks continued to intensify too, though, which tempered gains and was reflected again on afternoon Climate Prediction Center forecasts. 

natural gas commodity weather

The mixed strip action and shifting forecasts shows that traders are struggling to determine exactly which way to push natural gas prices in this narrowing wedge.

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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