January natural gas is seen opening 5 cents higher Friday morning at $3.70 as traders react to deeply oversold conditions and note forecasts of eastern storms for next week. Overnight oil markets fell.

In its Friday morning Energy 20 Day Outlook, WeatherBELL Analytics sees a pattern of a warm West Coast, Great Plains, and Midwest with a storm threat to the East out to about 10 days. In the six- to 10-day period a “hangover from the storm keeps East colder than normal while huge break engulfs the midsection,” said meteorologist, Joe Bastardi. In the 11- to 15-day period the warmth reaches a “high tide nationwide,” and from days 16 to 25 things start to get colder with winter settling in by day 25.

Analysts see the modest 22 Bcf storage withdrawal as setting up the eventual erasure of the year-on-year deficit, perhaps by the end of the month, the year-on-five-year deficit will take a bit longer. Jim Ritterbusch of Ritterbusch and Associates thinks “such a development is also highly likely and will be a dynamic that will act to contain occasional weather-induced price advances as this winter proceeds. From a technical perspective, today’s close into new low territory below $3.70 in the January futures contract would appear to set this market up for a quick test of next support at the 3.55 level,” he said Thursday.

“Additional declines are certainly possible should the current mild temperature views extend through the upcoming weekend. In the background, the near-record pace of production is back in the forefront of trader attention as it will continue to act as a limiter to weekly storage withdrawals going forward. Meanwhile, the front switch has swung to contango, and we look for this carrying charge to be sustained in the process of encouraging speculative investment in the coming weeks, especially if temperature trends continue to lean toward the mild side. We are still looking for a place to establish longer-dated bull spreads but would caution against such an effort until some regions of the country begin to exhibit some colder than usual trends.”

Others see the variability between forecast and actual storage draws as making it difficult to draw conclusions about weather, storage and prices going forward. Tim Evans of Citi Futures Perspective says that the 22 Bcf was clearly bearish, but looking back over the last two weeks, “it’s just difficult to forecast the impact on storage when temperatures shift dramatically. For the week ended Nov. 21, the consensus was for a 150 Bcf in net withdrawals and the actual figure was 162 Bcf. For the week ended Nov. 28 the consensus was for 38-41 Bcf and we saw 22. At the very least, this volatility reduces our confidence that the storage data for last week contains any clear economic signal.”

In overnight Globex trading January crude oil fell 26 cents to $66.55/bbl and January RBOB gasoline lost a penny to $1.7814/gal.