February natural gas is set to open 4 cents lower Wednesday morning at $2.33 as traders consolidate positions following two days of double-digit advances and also assess the longer-term supply outlook. Overnight oil markets retreated.

Near-term cold is decidedly in play, but forecasters note that more market-moving weather may be in store by mid-January. In a Tuesday noon update, Natgasweather.com said, “Colder temperatures are still on track over the eastern U.S. for this coming weekend into early next week, but all eyes should be focused on whether polar air over Canada arrives after Jan. 10th to bring much stronger than normal natgas demand, which we continue to see decent potential for.

“Until then, a potent winter storm continues to sweep across the Midwest and into the Northeast with areas of snow and ice into the cold air, with rain and thunderstorms out ahead of it. Milder temperatures will return to the East the next few days, with warmer than normal conditions continuing until the cold pool finally gets tapped late this week through the coming weekend with subfreezing temperatures expanding to cover many U.S. regions.”

In spite of the forecast cold, the National Weather Service (NWS) predicts diminished near-term heating requirements. For the week ended Jan. 2, NWS predicts that New England will see 205 heating degree days ( HDD), or 66 below normal. The Mid-Atlantic is expected have 177 HDD, or 74 below normal, and the greater Midwest from Ohio to Wisconsin is anticipated to have 228 HDD, or 57 below normal.

The forecast cold has a way to go to impact overall supplies. Tim Evans of Citi Futures Perspective calculates a 48 Bcf withdrawal for the week’s storage report, well below the five-year average of 95 Bcf, but the stout, longer-term surplus isn’t expected to decline until mid-January.

“With storage as forecast, the year-on-five-year average storage surplus that was 412 Bcf as of Dec. 18 would expand to 518 Bcf as of Jan. 8 before declining to 508 Bcf as of Jan. 15. In general, we view a rising year-on-year five-year average surplus as confirming the market is becoming better supplied on a seasonally adjusted basis, a downward fundamental pressure on prices.”

In overnight Globex trading February crude oil fell 97 cents to $36.90/bbl and February RBOB gasoline dropped 2 cents to $1.2611/gal.