Natural Gas Market Needs Bullish Weather

In our NGF last week, we noted how weather roulette was taking over the natural gas market. We wrote:

In our view, the most simplistic way to think about this going forward is that in order for natural gas prices to rise from here on out, we need the bullish weather models to materialize or else we risk seeing a $5/MMBtu handle. This is not the kind of risk/reward we like to get ourselves involved in.

Fast forwarding a week, and as you can probably already tell, the bullish weather forecasts did not materialize. 

As you can see from the TDD chart, we are seeing the most bearish outlook taking place now followed by a gradual shift back to colder-than-normal weather later.

The 6-10 day outlook above, which was previously expected to be bullish, turned out to be outright bearish with the large blocking pattern up North moving more South and preventing the cold from going into the Northeast.

The 10-15 day outlook continues to remain supportive of a colder than normal outlook but given the lack of certainty, the market will want to see it materialize into significantly higher heating degree days before bidding prices higher.

Looking back at this natural gas market, I think we made the right call to wait on the sidelines. Two weeks ago, we noted that there was a very bullish setup coming, but given our experience in trading natural gas, we've seen too many rug pulls and this was one that we are thankful to have avoided. Our past loss experiences paid dividends this time.