Early December Pattern to Bring Swings in National Demand
November 28, 2022: Volatility has been extreme the past 4-weeks and where daily 5-10% have occurred in nearly every session. We expect this will continue this week, aided expiration of Dec’22 futures, as well as the potential for large run to run weather model trends. As far as weather trends since Friday’s close, both the GFS and EC were 5-9 HDDs further warmer trending for Dec 3-7, favoring the important southern and eastern US warming well above normal. However, much of the weather data favors a rather chilly US pattern setting up Dec 8-11 and where colder trends were observed. But will the nat gas markets actually believe a colder pattern will arrive Dec 8-11 after the weather data once suggested a rather cold US pattern was coming for Dec 1-7, only to have it reverse notably warmer to where only one of those days is now sufficiently cold enough? As far as details, national demand will be light the next few days as much of the US is remains near to warmer than normal besides the colder Northwest. As frosty air over the Northwest spreads south and eastward Wed-Fri, as well as deep into Texas and the South w/lows of 20s and 30s, national demand will briefly surge to strong levels. However, the weather data trended warmer for next weekend into the following week, Dec 3-7, as the southern and eastern US again warm well above normal. There will be a fresh frigid shot into the West and N. Plains Dec 6-7, then spreading across the northern and central US Dec 8-11 w/lows of -0s to 30s and where the weekend weather data was colder trending. What’s also likely to influence trade this week is US production has increased back to near record levels of 101-102 Bcf/day after freeze-offs. And we also must consider the potential for Jan’22 contracts to trade lower at some point in the days ahead on negative roll yield as it takes over front month positioning a hefty 52¢ more expensive than recently traded Dec’22 contracts.