December natural gas was set to open about 2 cents higher at around $3.12 Wednesday as the market continues to puzzle over mixed weather signals ahead of Thursday's storage inventory data from the Energy Information Administration (EIA).
After last week's impressive gains, December natural gas has pulled back this week as forecasters have pointed to bearish risks showing up in one of the major weather models for late November.
In the overnight data, NatGasWeather.com said the Global Forecast System model continued to show colder temperatures Nov. 24-28, while the European model was calling for "lighter than normal national demand" during the period.
"Thus, there are important differences between the two primary weather models that again failed to become resolved after late next week, which is likely to frustrate the natural gas markets that would prefer greater clarity on expected demand."
Bespoke Weather Services said it tallied some additional gas-weighted degree days (GWDD) overnight on cooler guidance from both models in the medium-range forecast and "better long-range agreement."
"These medium-range GWDD additions appear enough to stabilize the natural gas market today, and accordingly we may not break below $3.05-3.06 support ahead of Thursday's EIA data," Bespoke said.
Predictions for Thursday's storage report suggest the season's first withdrawal could be in play. Stephen Smith Energy Associates, which revised its estimate Tuesday, is now projecting a slightly smaller withdrawal of 14 Bcf for the week ended Nov. 10. PointLogic Energy is calling for a 6 Bcf withdrawal.
From a technical point of view, ICAP Technical Analysis analyst Brian LaRose said following Tuesday's close that he's "not ready to give up on the bulls just yet, but it will not take much to force our hand. If the ratio of retracements of the move up from $2.847 (December contract) can not stop the slide, we will have no choice but to abandon the bulls in favor of another round of fresh lows.
"Peg $2.929-2.917 as our line in the sand. Look for December to visit the $2.720 neighborhood if this band of support does not hold."
December crude oil fell overnight and was set to open about 65 cents lower at $55.05/bbl. December RBOB Gasoline was down about 2.5 cents at $1.7358/gal.