Natural gas steady on day but down 19% on week as jury out on cold

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By Barani Krishnan

AiVIF.com - Natural gas bulls got a reprieve from the selling that has gutted the market as winter 2022 officially arrived on Wednesday. But there was no telling if an uptrend would immediately emerge as traders remained split on how cold it would be the week after Christmas.

Analysts say the near 20% walloping taken by gas futures on the New York Mercantile Exchange’s Henry Hub since the end of last week was due to mixed weather readings that showed that a widespread warm-up will blanket most of the United States by next week after this weekend’s freeze.

In Wednesday’s session, natural gas for January delivery on the hub settled up 0.6 cents at $5.3320 per million metric British thermal units. Week-to-date, the benchmark gas contract was down $1.27 per mmBtu, or 19%.

In Tuesday’s trade, January gas hit a nine-month low of $5.256 per mmBtu.

“With such massive selling action that has occurred in the last few days, NYMEX gas futures prices have been over-cooked to the downside,” said Gelber & Associates, a Houston-based energy markets consultancy. “At this juncture, prices are not only technically oversold but are also fundamentally oversold and are due for some sort of relief rally, which may be in the process of happening.”

According to Gelber’s projections, natural gas could continue seeing what it called “some wild volatility” over the next few weeks.

This is because daily storage draws were projected to top out at more than 53 billion cubic feet daily on Christmas Eve before incrementally declining for several consecutive days to potentially 4.5 bcf/d by New Year’s Day.

According to the most recent weather models, slightly above-average temperatures may linger into the first week of January before the next major Arctic outbreak emerges.

Some analysts, particularly those on the long-side, are looking out further into longer-range weather forecast models and indicators, including the European ECMWF and CFSv2 models, which were already pointing to the formation of yet another big Polar event to dominate much of the nation during the second week of January.

There are indications that the current frigid weather pattern may even reload again in late January or early February.

Gelber, on its part, believes that “by the end of the next ten days, natural gas inventories will have declined under 3,000 bcf with a storage deficit versus the five-year average approaching 200 Bcf.”