A significant warmer shift in forecasts over the weekend sent natural gas futures plunging early Monday. The January Nymex contract was down 17.9 cents to $2.396/MMBtu at around 8:45 a.m. ET.
For the Dec. 17-21 time frame, days 11 to 15 of the outlook period, Maxar’s Weather Desk said its latest forecast trended warmer versus previous expectations, showing “broadly warmer than normal” conditions for the Lower 48, including much-above normal temperatures in the central part of the country.
“The pattern is influenced by a trough over Western Canada and the Eastern Pacific, a feature” associated with La Nina and a positive Eastern Pacific Oscillation (EPO), the forecaster said. “The result is an air flow directed into North America from the Pacific, which is a warmer flow.”
Days six to 10, starting this weekend and continuing into next week, also trended warmer in Maxar’s updated forecast.
Bespoke Weather Services similarly described a “significantly warmer” temperature outlook compared to Friday’s expectations.
“All guidance congealed more solidly around the idea that a strong positive EPO regime will return…This will flood much of the nation with warmer air once again, much as we saw during the month of November,” Bespoke said. “…In short, the domination of warmth is set to continue.”
Based on the warmer changes to forecasts over the weekend, analysts at EBW Analytics Group modeled a net loss of 25.3 gas-weighted heating degree days, or 55.2 Bcf of demand, versus Friday’s projections, a decline “twice as great as during all of last week.”
“Even with the current, very mild forecast, December withdrawals are likely to exceed last year,” the EBW analysts said. “The mildest weather, however, is forecast for this coming Thursday through Sunday, and could” push physical prices at Henry Hub lower, “potentially putting continued downward pressure on futures for much of this week.”
The supply/demand balance has shown signs of tightening, a trend that could continue at lower price levels on a weather-adjusted basis, according to Bespoke.
However, “a high-end warm pattern will outweigh the balance side of the equation,” the firm said. “For that reason, prices have likely not yet found a bottom, barring a change in the pattern, as high-end warmth is never fully priced in, despite the 50-plus cent plunge in prices” since last week.
January crude oil futures were off 45 cents to $45.81/bbl at around 8:45 a.m. ET, while January RBOB gasoline was down about 1.7 cents to $1.2511/gal.
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December 07, 2020 at 09:02PM
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Bottom Falling Out for Natural Gas Futures as Warmth Blanketing Weather Maps - Natural Gas Intelligence
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