The natural gas crash continued today, with the January contract giving back almost 8% on the day after a solid gap down last evening. 

The entire natural gas strip got sold hard today, but losses were by far the most significant for the next few winter months, as forecasts remained warm and the winter premium from storage concerns is rapidly getting priced out of the market. 

This is of course best seen on the H/J March/April spread, which encapsulates the "stockout" fear (or fear that natural gas stocks get dangerously low before the end of high demand/storage withdrawal season in March). 

The spread is not yet where it was before prices spiked in November, but it is moving much closer to those levels and is over $1 off the highs. This comes on continued confidence that warmth dominates through Week 2 and into the end of December, as seen in the latest Climate Prediction Center forecast here. 

Our clients were warned of this, as we warned in our Friday Pre-Close Update that weather model guidance would maintain many of the warm risks that pressured prices on Friday and not provide any clear indication of cold returning. 

Then this morning in our Morning Update we highlighted that "we do not see much reason for prices to move much below $3.75, and would look for $3.5 to be firm..." as weekend models fit our expectations well. 

Sure enough, the January contract spiked up to $3.742 this morning before reversing and selling off through the day, setting a low at $3.516 and fitting our expectations almost exactly. We noted that though models were actually a touch cooler than we had forecast on Friday in our "Monday Expected" forecast, Week 3 forecasts in our Morning Update had trended even more bearish and we forecast that 12z model runs today would continue that trend. 

Warmer PM model runs, and especially very warm European model guidance, seemed to help keep prices right near support and limit any rallies as we continued to see widespread warmth in the medium-range on American GEFS guidance as well (images courtesy of Tropical Tidbits). 

Now, traders are looking to determine how weather forecasts are likely to change through the coming week, with the next weather trend likely determining whether prices close the week 20-30 cents higher or lower from their current prices.