December natural gas prices went for a ride today, bouncing off resistance just below $3.16 and selling heavily into support below around the $3.05 level. We saw a bullish run of the American GFS operational guidance with a major medium-range cold shot help push prices into resistance, but when the model’s own ensemble members did not confirm its output prices were quick to sell off.
This sell-off was not surprising to our clients, who received a Morning Note just ahead of the GFS warning that the natural gas strip did not appear especially conducive to any rally furthering. Instead, we settled with the largest losses along the winter strip, with the February and March 2018 contracts coming in as the largest losers.
Despite being up much of the day, then, H8/J8 closed lower on the day as the major cold shown by the GFS was not confirmed by other guidance, and concerns about a weather-driven demand spike next week eased.
That being said, there will be some lingering cold risks across the East even into the long-range that will help keep heating demand at least close to average. The 12z American GEFS shows decent cold risks on Monday, November 27th, though they gradually ease from there (image courtesy of the Penn State Electronic Wall map site).
We picked up on these mixed risks well, as in part of our Morning Update we effectively captured the range that natural gas prices would trade in through the day.
Now we head into tomorrow’s EIA data lingering near one support level with volatile weather forecasts. Over the past couple months we have seen natural gas EIA data rather consistently hitting expectations; eventually, that will break down and we could see the same type of volatility from an EIA print that we have seen from the release of a weather model. Yet until then, it appears we have enough weather-driven volatility to go around anyways.
