The natural gas market experienced a surge on Monday, with February Nymex futures climbing to $3.672. However, early Tuesday saw a decline in bullish sentiment due to conflicting weather forecasts. Despite the discrepancies between major models, both predict a cooling trend over the next 15 days. National demand remains strong, driven by below-normal temperatures across much of the U.S., although brief mild periods are expected. The inability to decisively break above the $3.766 pivot suggests near-term bearish sentiment, and markets may remain range-bound due to inconsistent model data.

Forecast Discrepancies Impact Market Sentiment

Market participants observed a notable rally in natural gas futures on Monday, only to witness a shift in momentum as weather models presented divergent signals. Traders closely monitored updates from various forecasting tools, which showed significant differences in their projections. While one model indicated an increase in heating degree days (HDD), another suggested warmer conditions. This inconsistency dampened the optimistic outlook that had fueled the previous day's gains.

In detail, the American model projected a slight uptick in HDDs, reinforcing expectations of colder temperatures and higher demand for heating. Conversely, the European model pointed toward milder conditions, reducing the intensity of the anticipated cold spell. Despite these variations, both models agreed on a general cooling trend for the upcoming two weeks. However, the lack of consensus has traders cautiously awaiting further updates to gauge the true impact on natural gas prices. The divergence in forecasts underscores the volatility inherent in weather-dependent commodities like natural gas. As traders await more consistent data, the market is likely to experience fluctuations based on each new update.

National Demand Remains Elevated Amid Intermittent Warm Spells

Despite the forecasted brief periods of milder weather, the overall demand for natural gas is expected to stay robust. Below-normal temperatures across a significant portion of the country will continue to drive high demand for heating. Short-lived warm intervals may provide temporary relief but will not significantly alter the broader trend. This pattern ensures sustained pressure on natural gas supplies, supporting near-term price stability.

Looking ahead, much of the eastern and central U.S. will face unusually low temperatures, with some regions experiencing lows in the -10s to 20s. Even traditionally warmer areas in the South will see temperatures dip into the 10s to 30s, further boosting heating requirements. In contrast, the West Coast will enjoy relatively mild conditions, with highs ranging from the 40s to 70s. The persistent cold front moving through the interior U.S. will maintain elevated demand levels. Traders and analysts agree that while short-term mild spells may cause minor fluctuations, the overarching trend of increased demand will likely persist, influencing market dynamics and pricing strategies.