December natural gas futures continued to race higher early Tuesday, adding 25.2 cents to $4.040/MMBtu shortly before 9 a.m. ET, with colder forecast trends overnight prompting further gains as the market frets over lean storage inventories.

The overnight weather data was colder trending across all models, showing a less intense break in the cold Nov. 20-24 and hinting at the possibility of more cold pushing back into the United States Nov. 25-28, according to NatGasWeather.

The Global Forecast System (GFS) was “again more aggressive with cold air compared to the European model for these days, so that needs to be resolved,” the forecaster said. However, “we must consider the GFS model has been far more accurate with the current series of cold blasts and was also quicker to see the cold shot late this weekend, while the European model has continuously had to play catch up for nearly two straight weeks.

“The net result of recent and coming patterns will be for deficits to marginally improve off this week’s slightly larger than normal build, then ballooning over 650-675 Bcf once next week’s report accounts for cold temperatures this week,” NatGasWeather said. “...Clearly, the background state remains bullish, and will remain so until weather patterns turn milder for a prolonged period, which isn’t likely for quite some time based on the Northern Hemispheric setup.”

The recent gains in cash prices highlight the potential gas-to-coal switching economics that could be in play this winter, with recent data showing that even a 25 cents/MMBtu move in gas prices can have a “dramatic” impact on power burns, according to Energy Aspects.

Despite last week’s looser-than-expected Energy Information Administration storage report, “fundamentals look tight for the next several weeks on the cold, with the week ending Nov. 16 now showing the season’s first triple-digit withdrawal,” the firm said. “The market has not had a triple-digit November withdrawal since the 2014 polar vortex, though that withdrawal was much higher.

“As we have stated before, the market will continue to move in sympathy with weather forecasts,” Energy Aspects analysts said. “However, as the overall inventory level is expected on current forecasts to get shaved so early in the heating season -- 100 Bcf is knocked off our estimates on early cold alone -- realized cash prices this winter should see a higher central tendency, barring a mild event later in the season.”

Looking at the technicals, the December contract early Tuesday was testing what Rafferty Commodities Group analysts had pinpointed as a key resistance level at $3.978.

“The weekly chart shows that the longer term resistance at the $3.978 area has not been challenged since December 2016,” analysts said. “...A break of this level could send the market considerably higher and present a whole other set of opportunities to trade back in the direction of the breakout,” similar to when the market took out previous resistance levels at $3.100, $3.354 and $3.674. “If the market cannot get through the $3.978 area, then it would be, at least, a short-term top.”

December crude oil was trading 82 cents lower shortly before 9 a.m. ET Tuesday at $59.11/bbl, while December RBOB gasoline was down about 2.4 cents to $1.6130/gal.