Natural gas futures and related exchange traded funds climbed on Wednesday as a bitter cold swept across the United States, fueling heightened heating demand.
The United States Natural Gas Fund (NYSEArca: UNG) surged 13.7%, breaking back above both its short- and long-term resistances at the 50- and 200-day simple moving averages, respectively. Meanwhile, Nymex natural gas futures advanced 13.9% to $4.84 per million British thermal units.
Updated weather models are predicting intense cold in the lower 48 states this month, fueling a rally in natural gas markets on heating demand, natural gas intelligence reports.
The European weather model shifted “decidedly colder” overnight, a development that was “clearly capturing market sentiment” early Wednesday, according to Bespoke Weather Services.
Bespoke Weather Services’ updated forecast showed colder trends for the later month, with late January on track to experience frigid temperatures to key parts of the lower 48.
“Models continue to advertise a very strong cold pattern in the eastern two thirds of the nation as we move through the final third of the month, with no sign yet of any re-warming” at the end of the 15-day outlook period, Bespoke added. “Pattern signals we follow outside of the models also point to colder risks, supporting the model output.”
Furthermore, Bespoke warned that “the best cold remains around day 10 and beyond, so while signals do point toward cold, we still need to see this progress forward in the forecast to increase confidence to more than average.”
Other weather forecasters mirrored these predictions. Maxar’s Weather Desk made a “large colder change” to its updated 11–15 day outlook for January 22 through 26.
“The changes are focused in the eastern half and associated with the colder output from the Euro model,” Maxar said.
“A strong ridge over the eastern Pacific and Alaska is the primary influence on the pattern, directing air masses from the polar region toward the Midwest, South and East,” Maxar added.
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