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January natural gas was set to open about 3 cents higher Wednesday at around $2.951 as the market looks to assess the impact from the arrival of more frigid temperatures across the eastern half of the country beginning this week.
The forecasts show plenty of potential heating demand ahead, which has led some analysts to look to high production levels and expectations for a bearish storage report to explain this week's move lower.
MDA Weather Services said in its morning six- to 10-day outlook that it "continues to favor much below normal temperatures around the Great Lakes and in the East, with low pressure deepening in the western Atlantic mid-period ushering in the coldest conditions in the second half."
In the 11-15 day outlook, the American and European weather models differ, with the American favoring colder developments in the Midwest and East "while the Euro is more limited with the colder anomalies in the East. The forecast generally falls between these solutions, with much belows averaging the period in the East, while below normal temperatures are in the Midwest as well.”
Powerhouse LLC President Elaine Levin said Wednesday to expect the January contract to find support below $2.90 as gas continues to trade in a long-standing range.
Levin noted that, with this winter's contracts falling below next winter's, "now the markets have flipped back into carry," a development that "may give the bears some encouragement."
Analyst Brian LaRose of ICAP Technical Analysis said following Wednesday's close that "with the Market Vane bullish consensus reading sitting just above trend line support, natural gas is once again at an inflection point. Bounce and we will likely avoid fresh lows.
"Fail to bounce and it will be time to get much more bearish" with "only three support candidates standing in the way of a dump to the $2.500 neighborhood: $2.854-2.845, $2.800-2.798-2.784, and $2.725-2.723."
January crude oil was set to open about 70 cents higher at around $56.92, while January RBOB Gasoline was set to open about 1.5 cents lower at around $1.7037/gal.