Natural gas futures are under pressure early Friday, continuing the sell-off that began on November 25 at $2.743. The early selling pressure was strong enough to take out the August 5 bottom at $2.475. This was the last low before a massive short-covering rally drove the market to $2.978 on September 17.

At 02:19 GMT, January natural gas futures are trading $2.474, down $0.005 or -0.20%.

Not only are the weather patterns changing, but the country is also split with winter storms on the western United States and milder temperatures elsewhere. Earlier in the week, weather models were supportive with rising expectations for a cold December. Then the models shifted to milder before trending warmer.

As far as the spot prices are concerned, storms and cold in the western United States helped lift December prices across the nation, but January prices fell by an average of 2 cents, and the balance of winter slipped 1 penny. Could this be an indication of a mild winter ahead?

West Coast versus Rest of the Country

According to Natural Gas Intelligence (NGI), “Trading activity could not be more different when comparing the Western United States and the rest of the country, with snow, rain and winds up and down the West Coast leading to strong demand and higher prices in regional cash and forward markets, while outlooks for a mild December elsewhere sent prices lower for the third week in a row.”

Futures Signal Weak Demand Picture

“The dramatic gains seen across the West were in stark contrast to the rest of the country, which generally followed the lead of NYMEX futures in the days leading up to Thanksgiving,” according to Natural Gas Intelligence.

Bespoke Weather Services said, “The wild swings during the short week were reflective of the dramatic shifts in weather outlooks in recent days. Both the Global Ensemble Forecast System (GEFS) and European models moved consistently warmer since November 24 and while the American data had been far colder, it more or less converged with the European model by Wednesday.”

“Despite even more warming, the endings of the runs showed a tendency toward more North Atlantic Oscillation blocking, which is somewhat boosting concerns that the pattern can go back colder beyond Day 15,” Bespoke chief meteorologist Brian Lovern said, “We do not believe this to be the case yet, and frankly, we’ve seen this for about a week and a half now, where models warm in the nearer term, then show hints of cold at the end. Unlike the first half of this month where everything rolled forward colder, medium-range cold has tended to roll forward weaker recently, and we think that can continue into mid-December.”