Natural gas prices saw another fairly volatile trading session, with the daily range again easily exceeding 10 cents. Yet even with that large range the February natural gas contract settled down just 4 ticks on the day and 1.5 cents on the week.

Yet through the day today we again saw the prompt month February contract prop up the rest of the strip, with the March contract logging the largest losses and the rest of the strip declining modestly.

This created an interesting divergence where G/H easily soared to new highs on the day.

Yet H/J actually pulled back decently, potentially as forecasts through the next two weeks did not feature many bullish weather risk.

This was seen again this afternoon, with Climate Prediction Center forecasts continuing to show more warm than cold risks through the end of January.

This is not surprising, as in our flagship Natural Gas Weekly Report issued Monday evening we explained that long-range forecasts would likely warm through the coming week.

On Tuesday we issued a Note which included a detailed analysis of why models would likely warm through the week, explaining how models were not handling the Madden/Julian Oscillation (MJO) well which would drive the long-range pattern. We showed how European guidance was shifting stronger with the ongoing pulse.

Sure enough, the latest MJO forecast today from the European ensembles shows a stronger MJO pulse lasting longer.

The result was a Morning GWDD forecast that featured slightly less heating demand than yesterday, limiting gains along the natural gas strip.

Now, traders are attempting to determine when colder weather may return, something we published a detailed note today. With inventory levels sitting below average, price sensitivity to weather will remain elevated, increasing the importance of our weather-driven sentiment. We broke this down in our Morning Text Message Alert , in which we were just slightly bearish but did not expect a large decline in prices despite GWDD losses.

Moving forward, we see the natural gas market paying as much attention to the risk of cold weather as to actual raw weather model output showing heating demand, as traders all compete to be the first one to gain further long exposure ahead of the next cold shot. Of course, should that cold not arrive, spreads remain wide enough to present decent downside for prices as well. This makes knowing which way weather models are likely to trend and exactly what risks they contain that much more important.