Natural gas prices appear to be breaking upwards today, as prompt month prices are finally above the critical $3.1 resistance level that had proven so difficult to overcome over the past few months. 

The move had been seen in advance by a number of traders, who noted a rounding bottom on the daily chart. Additionally, in the past few months contracts later in the strip had been seeing increasing strength as well, such as the April 2018 contract. 

This move comes with the first real increase in our forecast for Utility Gas Weighted Heating Degree Days, a key component of our Gas Weighted Degree Day (GWDD) weather-driven demand forecasts we publish twice a day. Last Friday in our Pre-Close Update we had noticed an increasing number of signs that weather forecasts in the long-range were likely to trend colder over the weekend, even though most computer models had not yet shown many cooler trends. This Update is published every Friday and estimates what weather-driven demand forecasts will look like come Monday in driving natural gas prices. 

Sure enough, those colder forecasts arrived over the weekend, and weather models began picking up on this colder transition in the pattern. American GFS ensemble guidance from this morning clearly shows the risk for temperatures to be below average from the Ohio River Valley into the Northeast on October 1st, boosting early season heating demand. 

Of course, it is not just these colder trends that helped move natural gas prices higher; this time of year weather forecasts play a far smaller role in driving weekly natural gas demand fluctuations as we are in the seasonal transition between cooling demand and heating demand. In fact, the forecast trend added relatively few GWDDs to our forecast as we lost some Population Weighted Cooling Degree Days (PWCDDs) as well over the weekend. Yet traders are turning their attention increasingly to natural gas as we head into the winter heating demand season and the market remains seasonally tight, with storage levels in most regions right around seasonal averages. 

With storage levels relatively close to the 5-year average and winter closing in, weather forecasts will only matter more over the next couple of months.