Natural gas prices have continued their run this week, closing up three days in a row following their previous 5 straight days of selling. We rolled over to the January contract with the December expiry yesterday, and despite a morning rally prices did pull back a bit through the afternoon. Still, between the contract roll and the continued rally, weekly prompt month gains are very impressive. 

While the prompt month rally between the contract roll and continued January contract strength was impressive, more impressive was Henry Hub cash strength in the face of bearish weather expectations the next couple of days, as the day-over-day cash increase beat the day-over-day prompt month rally (including the contract roll). 

Thus the impact of medium and long-range cold weather forecasts are now evident on charts of both prompt month natural gas and Henry Hub cash prices. 

These cold forecasts are getting better priced into the market as they become more widely known as well. Climate Prediction Center 8-14 Day forecasts clearly trended towards far higher probability cold today. 

These cold trends have been enough to rally natural gas prices and create the V-bottom we were expecting, yet H8/J8 still remains significantly below where it was the last time prompt month prices approached this level. 

This would seem to represent less concern about current natural gas stockpile levels headed into the winter season, even despite recent colder forecast trends. Part of this could be due to very limited storage withdrawals in the face of short-term warmth. Most estimates (including ours) favor the Energy Information Administration announcing a net implied flow of natural gas that will be above the -47 bcf 5-year average, allowing stockpiles to shrink the deficit they sit at to the average. An even smaller deficit is then expected to be announced next Thursday as well. 

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