January natural gas is set to open a penny higher Thursday morning at $3.55 before a government storage report that is expected to show the heftiest withdrawal of the season and well above historical norms. Overnight oil markets eased.

Overnight weather models turned cooler near-term. WSI Corp.in its morning six- to 10-day outlook said, "[Thursday's] six-10 day forecast period is colder than yesterday's forecast over the East and a bit warmer on average over portions of the West and Midcontinent. CONUS GWHDDs are up 5 to 138.6 for the period, which is still 10.9 below average.”

WSI said confidence in the forecast is only close to average. "The colder risks outweigh the warmer risks, mainly late in the forecast period based on the operational models and a potential -EPO [Eastern Pacific Oscillation]."

Analysts said current supply conditions emulate a period of much higher prices. "[T]his added up to the residential/commercial demand within the Lower 48 shifting up to the 63 BCF level on the 19th," said EnergyGPS in a Thursday morning note to clients. "On the same day, the power burns ramped up to top the 30 Bcf level. On the supply side, there were some disruptions due to freeze-offs in the Midcontinent/Rockies as well as an unplanned outage at a processing plant in West Virginia.

"Ultimately, the production numbers shifted down from a high of 71.4 Bcf last Friday to 69.8 Bcf.  The 1.6 Bcf drop added a little fuel to the fire as the net daily surplus/deficit shifted down to a negative 51 Bcf daily withdrawal. This level has not been seen since February 2015, when the entire northern portion of the Lower 48 remained extremely cold for a few weeks straight."

Spot futures traded as high as $6.493 on Feb. 24, 2015.

Last week's cold has bulls thinking the five-year storage surplus might be coming to an end. Supplies currently stand at 3,806 Bcf, or 186 Bcf greater than the five-year average. Last year, 33 Bcf was withdrawn, and the five-year average comes in at 101 Bcf. Estimates of the week's withdrawal are rolling in far greater than the current five-year surplus.

Ritterbusch and Associates is at the low end of the scale with a 179 Bcf estimate, but ICAP Energy is looking for a 206 Bcf pull. A Reuters survey of 19 traders and analysts showed an average of 201 Bcf withdrawal with a range of -179 Bcf to -216 Bcf.

In overnight Globex trading February crude oil fell 10 cents to $52.39/bbl and February RBOB gasoline dropped 2 cents to $1.5963/gal.