Another volatile day for natural gas. The February front month was down early this morning to $3.74 US/mm before turning around and rallying up to $4.00, a gain of 26 cents. The market settled at $3.93. The consensus among meteorologists is for cold weather through the end of the month, and I wonder if traders are very cautious about getting caught short when the forecast changes. The coldest day is supposed to be January 21st, which is the long weekend for Martin Luther King, Jr. Day, so there are good reasons to be cautious.
The 6-10 day forecast from NOAA shows a large swath across the US to be very cold, but the 8-14 day forecast shows a smaller likelihood of below normal temperatures.
I think that traders are waiting for when the forecast turns warm and then the selling will begin. However, the key issue is the ‘when’ part. If that doesn’t happen until March, the storage balance will be much lower than we thought it would be back in November.
[WFG]

