April natural gas is set to open 3 cents higher Wednesday morning at $1.89 as traders begin to focus on a lessening of supply for 2016 although season-ending storage set a record. Overnight oil markets were mixed.

Analysts see declining supply throughout 2016 and hint at a rebalanced market with stout season-ending inventories.

“Our 21-basin gas supply model shows U.S. dry production down by 5.2% in 2016. Appalachia is the only region in which our model shows growth, with today supply up by about 900 MMcf/d in 2016,” said Jefferies analyst Jonathan Wolff in a report. “Supply gains in this basin are offset by declines across all additional basins that we track, with the largest declines coming from the Eagle Ford (-900 MMcf/d), Anadarko Basin (-650 MMcf/d), and Barnett, Fayetteville, and East Texas (all falling by about 500 MMcf/d).

“We model total supply decline of 6.2%, with increased exports to Mexico and a decrease in net imports from Canada. We model supply down by 1.7 Bcf/d during the summer ‘refill season.'”

Jefferies doesn’t make any specific price predictions but said “longer-dated strips are holding up. Despite squishy cash markets (April trading at about $1.85/MMBtu), 2017+ ($2.73/MMBtu) have held up well due to reduced industry capex and slowing growth trends. The better tone to gas has surfaced in recent private market transactions that seem to confirm long-term value in gas.”

Thursday’s storage report is expected to show the season’s first build. “We are expecting an 11 Bcf injection this week, which would be the first injection of 2016,” said industry consultant Genscape Energy in a report. “DTI and TCO posted 1 Bcf and 1.7 Bcf withdrawals, respectively, while ANR, NNG and several South Central facilities posted injections. GWHDDs declined by 23 week/week, which suggests a decline in space heating demand of close to 25 Bcf, while power demand also appears to have declined slightly.

“Although milder temps led to a large decline in power loads, coal took most of the decline this week, allowing gas gen to fall by only (0.2 Bcf/d). Supply declined by 16 Bcf, driven by a decline in both production and imports (-6 and -9 Bcf, respectively).”

A build in next week’s storage report looks likely as well. The National Weather Service (NWS) forecasts below-normal heating load in key eastern and Midwest markets. For the week ended March 26, NWS predicts New England will see 162 heating degree days (HDD), or 28 below normal. New York, New Jersey and Pennsylvania will likely experience 146 HDD, or 23 below its seasonal tally, and the greater Midwest from Ohio to Wisconsin is likely to have 158 HDD, or 19 below normal.

In overnight Globex trading May crude oil fell 31 cents to $41.14/bbl and May RBOB gasoline rose fractionally to $1.5268/gal.