If one were to look at the day-over-day movement of prompt month natural gas prices or the Henry Hub cash market today, it would seem like not much of interest occurred.

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One quick look at the daily natural gas candlestick chart, however, and the story quickly changes. 

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To start, this morning the Energy Information Administration announced that last week we had injected 51 bcf of natural gas into storage, matching our +51 bcf expectation perfectly and fitting a number of market expectations. Prices responded by declining, not seeing a bullish catalyst to push them higher in the face of what seemed like a warm entrance to November. 

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Yet afternoon American GFS and GFS ensemble modeling guidance reversed to show more cold risk into early November across the center of the country, and soon enough prices were flying off from their lows back to near even on the day. Every morning we post a screener for clients analyzing what we thought the influence of each weather model was on natural gas prices, and early this morning we saw the influence of American modeling guidance turning a bit more bullish, so this did not come as much of a surprise. 

This was followed up by a note later this morning warning of long-range volatility in the forecast and the potential for long-range models to trend colder in November due to a number of atmospheric trends. Sure enough, this afternoon the GFS ensembles flipped to look significantly different from their overnight runs with more ridging risks in the Gulf of Alaska. The guidance went from showing a warm Great Plains and Midwest in the long-range to a colder one in just 12 hours (image courtesy of the Pennsylvania State Electronic Wall Map Site). 

Almost all the natural gas rally this afternoon came from this flip in modeling guidance, as colder risks through November would certainly elevate natural gas demand expectations. Now, it is up to traders to determine how much demand they expect to arrive, and we can expect volatility into the weekend as they attempt to judge how weekend forecasts will change yet again.