January natural gas is set to open 4 cents lower Friday morning at $3.39 as longer-term weather forecasts turn more mild and traders mull a classic case of "buy the rumor, sell the fact." Overnight oil markets rose.

WSI Corp. in its Friday morning report to clients said, "The 11-15 day period forecast is also generally warmer than the previous forecast. CONUS GWHDDs are down 5.3 for days 11-14 and are now only forecast to be 138.1 for the whole period. These are 11.5 below average.

"Day to day details will be key and could cause the forecast to waver in either direction. However, -PNA [Pacific North America pattern] supports warmer risks over the southern U.S. along with a colder risk over the Southwest and north-central U.S."

The recent market tumble clearly has the bulls with their backs against the wall, and both fundamentalists and technicians see further weakness ahead. Jim Ritterbusch of Ritterbusch and Associates sees the weather forecasts as "suggesting above-normal patterns across the eastern half of the U.S. that will sharply reduce withdrawals from storage beyond next week's EIA report. [Thursday's] release offered a supply draw that was about 20 Bcf larger than average industry expectations.

"The market's sharp selloff in the face of such a bullish report underscores a heavy pricing environment that has been accompanied by significant chart damage. From here, we see additional weakening that will carry January futures to about the $3.25 level, especially if weekend temperature updates suggest milder trends into the New Year."

Elliott Wave adherents had calculated critical support at $3.486, and with Thursday's weak close the bulls have some work to do. "Thursday gave a failed attempt to rebound and a weak close. It is once again rally or else time for the bulls," said Walter Zimmermann, vice president at United ICAP, in closing comments Thursday.

"But what about the cold snap? Natty did just rebound from $2.546 to $3.777, so a great deal of cold is likely already discounted in current price levels. To have any hope of saving a bull outcome, natty needs to quickly get back above $3.720. A 'cold weather is coming rally' can be fun as long as one takes profits before it actually gets cold. Otherwise the risk is a 'buy the rumor, sell the news' dump."

In overnight Globex trading January crude oil rose 22 cents to $51.12/bbl and January RBOB gasoline added a penny to $1.5485/gal.