The natural gas market always tests the extremes before turning. This phenomenon is more extreme in winter gas trading, and based on what I’m seeing in the weather setup, the turning point could be here.
In the latest ECMWF-EPS update, the big “turning point” in the weather update was 7.5 day outlook snapshot.
Source: Weatherbell.com
The ECMWF-EPS 12z (this afternoon) saw heating degree days spike by ~19. Total heating demand has increased storage withdrawal by ~180 Bcf since last Friday. Such a material increase would’ve coincided with a much stronger price response (March contracts have been flat since Dec 15, our last update). But given the pervasive market doubt still lingering, the natural gas market is in a wait-and-see mode now.
But based on everything I’m seeing now, the market might be taking the latest weather update too lightly. I will explain why:
The above is the current 15-day cluster. As you can see, the usual bearish pattern (Alaska trough) remains in place, and signals to the market that the East coast could be warmer-than-normal.
But the signal that I’m seeing, derived from the ECMWF-EPS long-range outlook, is that the latest ECMWF-EPS update materially changed the forecast for January.
15-22 Day
In the latest 15-22 day outlook, you can see that while the 15-day pattern holds, the blocking pattern for the stratospheric warming event is taking place. Such a pattern usually signals extreme cold in the US, and we see this in the 22-29 day and 29-36 day outlook:
22-29 Day
29-36 Day
Now what you will see in both charts above is that the signature blocking pattern remains in place:
Ridge in Alaska.
Ridge in Greenland
Again, this usually foreshadows very bullish weather, so while you can never count your chickens before they hatch, it appears we are headed there.