Tuesday Mid-January Pattern Update

Written by on December 31, 2013 in NatGasWeather - No comments

Moderating Temperatures To Start The Second Week Of January…Then What?

 

The nat gas futures markets are in selling off more than 2% this morning even with cold conditions expected over the coming week.  The weather to start the second week of January should bring moderating temperatures as the very cold air over the Midwest retreats back into Canada.  But it will still be fairly cool across much of the US as a zonal (east to west) weather pattern sets up with several weather systems tracking across the nation, keeping nat gas and energy demand moderate.  These conditions may only last 4 or 7 days, as it is very possible additional cold blasts will be hovering right near the US border and will have opportunity to re-invade the central and eastern US if the jet stream fails to hold on over the west coast.  There is still quite a bit of data to support both camps.  We realize weather isn’t the only factor driving prices and the sell off could just be continued profit taking after the recent big rise or big players finally hearing of more convincing forecasts of warming conditions for the second week of January.  We do caution that while the weather patterns transition the second week of January to something a bit milder, which we have been forecasting for some time, the markets shouldn’t want to sell off too much as there are still statistical odds, about 20-30% chance, that additional very cold outbreaks could be coming around the 12-14th of January.   Compare the two bottom images below and you will see significant differences in the forecasts after January 11th.   The less likely solution is the bottom one and it shows brutally cold conditions again pushing well into the southern US, which would lead to a massive spike in nat gas and energy demand.  The more likely mild scenario (top image) allows colder air to set up over the Gulf of Alaska, preventing cold outbreaks from invading the northern US.

 

The market sell off may not want to get too carried away as there is lots of data to support cold returning to close out the second week of January.

The market sell off may not want to get too carried away to the downside as there is plenty of data to support cold returning to close out the second week of January.

 

The weather for the second week of January should modify as very cold air retreats back to Canada, but cool conditions will still continue for much of the US.

The weather for the second week of January should modify as very cold air retreats back to Canada, but cool conditions will still continue for much of the US, leading moderate to high nat gas and energy use.

 

The market better not get ahead of itself as there are still statistical odds that additional cold outbreaks could come around the 14th of January, which should be taken seriously.

However, the market better not get ahead of itself as there are still statistical odds that additional cold outbreaks could come around the 14th of January, which should be taken seriously and would lead to a huge upside surprise, especially if the markets continue to sell off.

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