Next-day gas gained in Monday’s trading as buyers for near-term supplies prepared for a winter blast expected to send cold temperatures as far south as Oklahoma by Thanksgiving. Weakness in the Midwest, Midcontinent and Gulf was countered by strength in the East, Rockies and California.

The NGI National Spot Gas Average rose by a penny to $2.19, and the East jumped by close to 20 cents. Futures bounced higher largely on short covering as traders pounced on overnight lows approaching $2 to cover shorts.

At the close, December had risen 6.5 cents to $2.210 after trading as low as $2.05 overnight and January was 5.2 cents higher at $2.343. January crude oil shed 15 cents to $41.75/bbl.

“This looks like short covering,” a New York floor trader told NGI. “We are starting to get cooler weather, like this morning was in the mid-30s. For the most part you have a lot of shorts out there, trying to recoup funds and otherwise drive this market higher.

“Every time you get close to $2 traders are looking for opportunities to buy this market, but there is no indication you will not see a $1 handle again.”

Analysts aren’t so sure about a $1 handle and actually see price improvement throughout 2016. Nicholas Potter of Barclays Commodities Research said data shows relative improvement (see related story).

“The outlook shows a relative improvement in prices over the course of the year,” Potter said. “We see 1Q2016 price averaging $2.65/MMBtu, 2Q2016 $2.45/MMBtu, 3Q2016 $3.10/MMBtu and 4Q2016 $3.15/MMBtu. This forecast makes us bullish relative the curve for the second half of 2016.

“In the short term, it is hard to argue with the bearish fundamentals as we head into this winter. High storage levels and resilient production have caused us to lower our 2016 natural gas price forecast from $2.95/MMBtu to $2.84/MMBtu. However, the balances should start to tighten in the second half of 2016 as production growth slows and new demand enters the market in the form of liquefied natural gas exports, growing pipeline exports to Mexico, new industrial demand and strong power burn.

Potter cautioned that Mother Nature holds all the cards and determines whether the natural gas market tightens in 2016 or faces another year of oversupply. “The market is doing what it can to rebalance, but El Nino poses downside risk to our price forecast, which assumes normal weather. A 4% warmer than normal winter would cut at least 2 Bcf/d of residential/commercial demand and would leave storage levels in April around 15% higher than our base case estimate of 1.7 Tcf.”

Weather forecasters see signs that El Nino is beginning to take hold. Commodity Weather Group (CWG) in its Monday morning report said, “Despite detail differences from Friday, the big picture view of temporary colder volatility and then warmer weather returning by the second week of December remains on track. The colder weather is not as strong when it hits the central to eastern thirds of the U.S. compared to original expectations (and the Western chill is not quite as strong as we forecast back on Friday), but it is faster coming East, which brings in some more [energy] demand to the holiday weekend.

“The transition to a warmer pattern focuses the biggest warmer changes to the northern half of the U.S., but it is not as fast and not as strong as the models indicated late last week. So we see a warm North and cool South for the 11-15 day — a classic El Nino signature — which is a pattern that is still net cooler than last year’s big warm December story, but one that is also favored to return demand to below-normal levels,” said CWG President Matt Rogers.

Risk managers with a small long position are ready to exit. DEVO Capital Management President Mike DeVooght said in a weekend note to clients, “On a trading basis, we did take a small long position in the January contract. If we break the $2.10 level in the spot December contract, we will exit the position and stand aside.”

He added that last week’s action consisted of the market starting “to break on expectations that the cold snap was not going to be enough to absorb the excess supplies in storage. The weekly storage number came in close to expectations, but the fact that we had a build at this time of year when we often see draws, helped to push the market lower.”

Thanks to the holiday-shortened trading week, the Energy Information Administration’s natural gas storage report for the week ending Nov. 20 has been moved up a day to Wednesday at noon eastern time.

For now, DeVooght is holding a long January futures position for both trading and end-user accounts at $2.50. For producers he suggested standing aside.

In the physical market, prices continued to rebalance from the oversupplied Marcellus and Utica to points west. Next-day gas on Dominion South rose 7 cents to $1.63, and gas on Tennessee Zn 4 Marcellus added 11 cents to $1.45. Gas on Transco-Leidy Line gained 15 cents to $1.654.

Points on the REX Zone 3 Expansion declined. Gas on Midwestern at Edgar, IL fell 4 cents to $2.17, and deliveries to NGPL at Moultrie County IL dropped 3 cents to $2.18. Gas delivered to Panhandle Eastern at Putnam County IN lost 3 cents to $2.18 as well.

Prices at major hubs softened. Gas at the Algonquin Citygate rose 12 cents to $4.49, but deliveries to the Chicago Citygate dropped 6 cents to $2.26. Gas at the Henry Hub came in 2 cents lower at $2.14, but at the PG&E Citygate fell 2 cents to $2.68.