Natural gas prices spiked Monday after a new long-term North American weather forecast found much higher heating demand than previously expected.
The latest forecast from Bespoke Weather Services suggests above-average gas demand extending from Nov. 9 through Nov. 18.
“Our sentiment has ticked slightly bullish in that weekend weather models were some of the most dramatic in recent memory, with all guidance adding an incredible amount of heating demand against the odds,” Bespoke said.
El Nino In The Forecast
Bespoke said near-term heating demand will likely peak Nov. 14 and that warmer weather trends will likely return in the second half of the month.
According to AccuWeather, the U.S. will see a return of the El Nino weather pattern this winter, resulting in much colder-than-average temperatures in much of the Northeast, mid-Atlantic, Great Lakes and Ohio Valley of the country, particularly in January and February.
“New York City and Philadelphia may wind up 4 to 8 degrees colder this February compared to last February,” senior meteorologist Paul Pastelok said in October.
The Southwest could experience a dry winter with temperatures 2 to 4 degrees warmer than usual, but Americans in the Southeast, Tennessee Valley and Gulf Coast region should not expect a repeat of the above-normal February temperatures experienced in February 2018, the meteorologist said.
The Price Action
Natural gas prices traded higher by 7.5 percent to $3.53 MMBtu on Monday and are now up 18 percent year-to-date. The huge price spike also drove extreme volatility in some popular natural gas ETFs as well:
- United States Natural Gas Fund, LP (NYSE: UNG) was up 7.4 percent.
- VELOCITYSHARES 3X INVERSE NATURA ETN (NYSE: DGAZ) was down 22.4 percent.
- VELOCITYSHARES 3X L (NYSE: UGAZ) was up 21.9 percent.
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