April natural gas is expected to open 10 cents lower Monday morning at $1.69 as near-term weather models keep coming up with warmer solutions and indicate a sharp reduction in near-term heating requirements. Overnight oil markets were mixed.

Weather models turned sharply warmer. “[Monday’s] six-10 day period forecast features widespread above-average warmth, except in New England and the southwestern U.S.,” said WSI Corp. in its Monday morning report. “Today’s forecast is sharply warmer than Friday’s forecast over the eastern two-thirds of the nation but cooler over the West. CONUS GWHDDs are down 20.5 to 78.9 for the period. Forecast confidence is a little higher than average for a change as medium-range models are in good agreement with a pattern shift.

“The Northeast and southwestern U.S. have a risk to the cooler side. The central U.S. and even the East could run warmer by the end of the period.”

Critical to any price recovery is a decline in production and the number of drilled but uncompleted (DUC) wells, particularly in the Northeast. According to reports, Wood Mackenzie Research puts the number of DUCs as having fallen sharply from initial estimates of 1,200 at its peak to just over 650 wells at present. “Producers have obviously been choosing, not surprisingly, to complete wells as opposed to drill new ones,” said Breanne Dougherty, analyst with Societe Generale in New York.

“This has added volumes into the supply stack even as rig counts have continued to drop; news out of producers is pretty consistent that capex will remain very light until there is a material improvement in the price environment. A combination of all of these supply factors continues to support our view that, at best, production should hold flat this year. The longer gas and oil prices stay low, the larger the risk of production sliding into structural decline by the end of the year

“We expect prices to move back up above $2/MMBtu as summer weather begins to make its appearance (normally around

mid to late May) and for the price to ascend gradually through core summer, reflecting the tightening of the ledger that should

start being visible. Our July through December price average is $2.95/MMBtu.”

Others aren’t shy about forecasting a decline in production. “With now two of the top five U.S. gas producers in clear distress, the implications are highly bullish for macro gas,” wrote Jefferies analyst Jonathan D. Wolff. “Our bottoms-up 21-basin U.S. supply model is at 3.2% exit-2016 decline rate, but the potential for further declines is becoming more obvious.”

In overnight Globex trading April crude oil fell 15 cents to $32.00/bbl and April RBOB gasoline was unchanged at $1.2758/gal.