February natural gas is set to open 5 cents lower Tuesday morning at $2.83 as near-term weather forecasts show a modest warming trend, and analysts stretch to find any kind of longer-term supportive case arising out of recent weather developments. Overnight oil markets continued to melt down.

Analysts see something of a chance the market could advance following Monday’s sharp reversal. Tim Evans of Citi Futures Perspective in closing comments Monday said, “The market may still have a chance to work higher again as the colder seasonal temperatures are likely to translate into larger storage withdrawals in the weeks ahead. In fact, even Thursday’s storage report for the week ended Jan. 2 may show a draw of 122 Bcf, the largest decline since the week ended Nov. 21. Current temperature forecasts suggest even stronger levels of heating demand for this week and next week.

“While we see enough heating demand and storage withdrawals in the weeks ahead to justify some recovery in natural gas prices from current levels, we have to admit that the comparisons with five-year average storage flows will still look at least somewhat bearish, with the 81 Bcf year-on-five-year average storage deficit as of Dec. 26 shrinking to 17 Bcf as of Jan. 23.

“This declining deficit confirms that the U.S. natural gas market continues to become better supplied on seasonally adjusted basis, which is typically bearish for prices over the intermediate term. In this context, we’d view a price rally as an upward correction within what may still be a bearish trend.”

Evans recommends working a buy stop at $3.23 basis the February contract as a trigger to enter the market on the long side. He then suggests a sell stop at $2.97 to limit risk on the trade.

Overnight weather markets moderated slightly. WSI Corp. in its Tuesday morning report said, “[Tuesday’s] six-10 day period forecast is not as cold as previous forecasts due to the day shift. However, day-to day-temps did run colder over the southern U.S.

“Forecast confidence is average today as medium-range models are in modest agreement with the transitional pattern. There are some key technical differences and uncertainty during the end of the period. The potential change with the Pacific pattern toward a positive PNA supports a risk to the colder side across the South and East Coast. The Northwest, northern Rockies and northern Plains have a slight risk to the warmer side.”

In overnight Globex trading February crude oil shed another $1.02 to $49.01/bbl and February RBOB gasoline gave up 2 cents to $1.3602/gal.