The expiring February futures contract is expected to open 7 cents lower Wednesday morning at $2.91 as traders factor in yet another modification to the near-term weather outlook. Overnight oil markets were mixed.

Weather forecasts continue to flip-flop and Wednesday’s soft open is seen as moderation sets in across the Northeast. WSI Corp. in its morning six- to 10-day outlook says that “[Wednesday’s] six-10 day period forecast is similar to [Tuesday’s]. However, it’s not quite as cold across the Northeast, but even colder across the Midwest, Plains and Front Range during the back half of the period.

“Forecast confidence is about average as models are in reasonably good agreement with the cold pattern. However, model variability and inconsistency with the details are limiting factors. There are risks in either direction given the inconsistency with the models. The general risk may be to the colder side over the eastern two thirds of the nation, while the West has a slight upside risk.”

The market moves with every adjustment to the weather forecasts, and according to one analyst “traders are also on the alert for any surprises in Thursday’s DOE storage report for the week ended January 23,” said Tim Evans of Citi Futures Perspective in closing comments Tuesday.

“The consensus view may still be in a state of flux, but early editions of the major newswire surveys are running close to our own forecast for 113 Bcf in net withdrawals, a bearish outcome compared with the 168 Bcf five-year average for the date.”

By the middle of February Evans sees the year-on-five-year deficit less than 100 Bcf and notes that “the storage scenario looks somewhat more supportive than a day ago, with the February 13 year-on-five-year average projected at 95 Bcf instead of 72 Bcf, but the overall pattern is similar, with the modest overall net change in the year-on-five-year average deficit suggesting the data is neutral on a seasonally adjusted basis.

“Natural gas may still retain some potential for a later winter rally if the second half of February proves cold and the deficit lingers longer than anticipated, but we also see potential for the market to weaken as complacency regarding supplies increases after the midpoint of the winter is past.”

Evans suggests using a buy stop at $3.06 in the March contract as a way to establish a market position with stop loss protection at $2.71. He would raise the stop to $2.96 if March can trade to $3.30.

In overnight Globex trading March crude oil fell 90 cents to $45.33/bbl and March RBOB gasoline gained a penny to $1.3951/gallon.

Evans suggests using a buy stop at $3.06 in the March contract as a way to establish a market position with stop loss protection at $2.71. He would raise the stop to $2.96 if March can trade to $3.30.

In overnight Globex trading March crude oil fell 90 cents to $45.33/bbl and March RBOB gasoline gained a penny to $1.3951/gallon.