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First Look - Natural gas surges 60c on frigid forecasts

Oil is trading higher, extending gains from last week
- WTI is trading up to the higher end of the recent trading range, with prices near $71/Bbl
Risks to Middle East oil flows increasing (BBG)
- According to Rapidian Energy Group, there are new concerns that rising tensions in the Middle East could impact oil flows in the region
- Israel recently launched new attacks on Houthi militants in Yemen, potentially threatening the fragile peace between Saudi Arabia and Yemen
  - Israeli Prime Minister Netanyahu said, “We are determined to cut off this terrorist arm of Iran’s evil axis,” adding further, “We will persist in this until we complete the task.”
- The prospect of harsher sanctions on Iran from the incoming Trump administration also poses a risk of reducing global crude supply

February natural gas futures surge as temperatures drop
- The February Nymex contract was up 68c at $4.06/MMbtu as of 8:37 a.m. CT
- Most of the demand gains (versus Friday) were from the American weather model at 23 HDDs
  - The European model showed a more modest gain of 14 HDDs
- The forecast for January HDDs now ranks as the eighth coldest in the 2000s at an expected 980 HDDs (The Commodity Weather Group)
  - The 10-year climate normal is 903 HDDs
AEGIS notes that weather can play an outsized role on market fundamentals when it comes to storage
- Colder than normal weather can cause larger than modeled inventory withdrawals
- The larger inventory pulls can reduce or even eliminate the storage overhang versus the five-year average
- Inventories could find themselves below the five-year average by the end of January if January weather lands near that 980 HDD estimate