January natural gas was set to open about 6 cents higher at around $3.19 Wednesday, with the market continuing to gain momentum on growing confidence in a cold weather pattern set to move in after the first week of December.
January, the prompt-month, appears poised to pick up where December left off Tuesday when it surged 14.6 cents higher before coming off the board at $3.074. The January contract has now gained more than 20 cents since Monday after a bearish end to the previous week.
"Weather forecasts overnight continued to add higher confidence in forecasts for significant cold moving in through the medium-range and into the long-range," said Bespoke Weather Services in a morning update to clients. "The exact intensity and duration of this cold remains a bit uncertain, and will eventually determine how much upside we see in the natural gas market, but European guidance overnight printed out close to a max bullish look into the long-range, with a sustained trough in the East and significant upstream blocking.
“Strong model agreement on upstream blocking means it will be very difficult for this pattern to break down," and some warming in the near-term forecasts was "easily made up for by an increase in long-range gas-weighted degree day forecasts."
Meanwhile, the Energy Information Administration's (EIA) weekly storage inventory report is just around the corner, and predictions thus far point to another November withdrawal.
Stephen Smith Energy Associates is calling for a withdrawal of 41 Bcf for the week ended Nov. 24, lower than an original estimate for a 45 Bcf withdrawal. PointLogic Energy models are predicting a 35 Bcf withdrawal. The firm said its estimate is based on a 2.9 Bcf/d week/week decline in demand driven by the residential/commercial sector in the Northeast.
"Low-side risk this week could come from the South-Central region, where local demand increased by nearly 1 Bcf/d," PointLogic analysts said.
EIA reported a net 46 Bcf withdrawal for the week ended Nov. 17, a slightly smaller decline than what the market had been expecting.
January crude oil was set to open lower Wednesday by about a quarter, trading at around $57.74/bbl. December RBOB Gasoline was down fractionally at around $1.7680/gal.