January natural gas is expected to open a penny lower Wednesday morning at $3.64 as traders balance somewhat more bullish fundamental data with a weak technical picture and an unsupportive weather outlook. Overnight oil markets weakened.

Weather forecasters see little change in the outlook for persistent above-normal temperatures going forward. In its morning 11- to 15-day outlook, MDA Weather Services said, “Changes are fairly minor to the outlook [Wednesday] with the southern tier shifting slightly cooler to the south of the ongoing North American ridge. This southern tier cooler look comes as a stronger ridge begins to build over the western U.S. late in the period, prompting the cooler potential over Texas and the southern tier in the second half.

“While cool air could threaten the South and East, the central part of the nation remains firmly in above to much above normal readings in a persistent +PNA (Pacific North American) pattern.”

From a technical perspective, analysts see a continuing bearish landscape and see the bulls in a difficult position justifying higher prices. “No change,” said Brian LaRose, technical analyst at United ICAP. “To have any shot at a double bottom developing, bulls need to hold $3.537 and launch a rally that clears 0.500 of the decline from $4.529 (currently $4.057). The 12-month strip would need to clear $3.771.

“[There is] no case for a bottom forming otherwise. Meanwhile, see room down to $3.305 for natgas and $3.330 for the strip at minimum if the bears can crack $3.537.”

On a more fundamental note, the supply-demand balance may be turning more constructive. The Energy Information Administration (EIA) in its latest Short-Term Energy Outlook (STEO) revised downward its March 2015 storage projection to 1,431 Bcf. That’s lower by 131 Bcf (8.4%) compared with the previous STEO (see Daily GPI,Dec. 9).

“Natural gas inventories are expected to be lower than previously expected at the end of the heating season next March because of the large withdrawal of gas from storage during November due to colder-than-normal weather in most of the country,” said EIA Administrator Adam Sieminski. “However, natural gas expenditures are still expected to be lower than last winter.”

The Henry Hub spot price averaged $4.12/MMBtu in November, a decline of 34 cents from October. The agency projects Henry Hub prices to average $4.44/MMBtu in 2014 and $3.83/MMBtu in 2015. EIA also revised upward by a penny its price forecast for winter 2014-2015 to $3.98/MMBtu. EIA expects spot prices to remain above $4.00/MMBtu through January before declining slightly for the remainder of the winter.

In overnight Globex trading January crude oil fell 82 cents to $63.00/bbl and January RBOB gasoline lost 2 and a half cents to $1.6984/gal.