Is Natural Gas Priced For Perfection?
Natural gas prices are moving higher this week on the back of colder for longer weather forecast. For the first time in a very long time, January heating degree days will be meaningfully higher than normal.
Source: Commodity Wx Group
According to Commodity Wx Group, January 2025 will be the coldest January in 11 years. Unlike previous cold events, this January is best characterized as persistent cold for longer.
Take 2024, for example, we had a polar vortex hit during the first 2 weeks of January, but warmer-than-normal weather soon followed, which pushed HDDs back to the 10-year norm.
This year, the persistent cold is doing far more damage to natural gas fundamental balance than a one-off event.
Looking at the latest ECMWF-EPS weather model, we should see elevated heating demand continue until the end of January.
ECMWF-EPS TDDs
6-10 Day Outlook
10-15 Day Outlook
15-Day Cluster
With all that said, should natural gas prices move even higher from here?