December natural gas futures were down 5.1 cents to $4.649/MMBtu shortly before 9 a.m. ET Tuesday after a big swing lower overnight, and analysts were anticipating more volatility ahead of what could be the season’s first triple-digit storage withdrawal this week.

After a 42.8 cent rally to settle at $4.700 Monday, the prompt month sold off overnight to as low as $4.361 before steadily climbing through the early morning hours.

NatGasWeather viewed the selling as “technically driven” and said overnight weather data continued to show chilly conditions into the start of December with only brief breaks between cold blasts.

The models were mixed for the first week of December, with the Global Forecast System slightly warmer and the European model colder, and the colder trends in the European early Tuesday may have helped prices rally off the overnight lows, according to the forecaster.

NatGasWeather said it expects “dangerous volatility” to continue into the Thanksgiving break, aided by Wednesday’s Energy Information Administration (EIA) storage report potentially showing a “massive draw near or over 100 Bcf...increasing deficits to the highest levels in years, with further increases expected next week as cold conditions this week are accounted for.”

Energy Aspects late last week issued a preliminary forecast for a 122 Bcf withdrawal for the upcoming EIA report, citing a “two-fold increase” in gas-weighted heating degree days (GWHDD) week/week, with a 15 Bcf/d increase in residential/commercial demand and a 5 Bcf/d increase in power demand. Maintenance activity in the Permian Basin led to a 0.5 Bcf/d decline in production, which was offset by an uptick in Canadian imports, according to the firm.

Some of the extreme volatility observed in the market recently has been “driven by positioning, short-covering, stop-outs and the follow-through of algorithmic trading on the movements of both of the former,” Energy Aspects analysts said. “...Our forecasts do not peg another triple-digit withdrawal until the week ending Dec. 14. The next several reports will show a notable step down in storage activity, on lower GWHDDs and Thanksgiving holiday impacts.

“Subsequently, some step down in cash pricing has been anticipated on the lower call on storage,” according to the firm. Cash prices are not likely to drop “meaningfully below the high $3.00s unless a significant return to milder weather emerges in the forecasts.”

In terms of the latest supply picture, Genscape Inc. data showed top-day production nominations for the Lower 48 down 0.7 Bcf/d day/day Tuesday, but month-to-date supply continued to outpace October output.

Genscape’s Spring Rock production estimate for Tuesday came in at 85.2 Bcf/d, down about 730 MMcf/d from Monday based on drops in Texas, the Permian Basin and the Rockies, according to senior natural gas analyst Rick Margolin.

“As always, that number is subject to change with nomination revisions. During the past week revisions have largely tended to be upward, including one day last Friday in excess of 1 Bcf/d,” Margolin said. “Taking a bit of a larger view, month-to-date production continues its upward trajectory, averaging 85.18 Bcf/d, more than 0.4 Bcf/d above October’s average.

“Strong month-on-month output from the Gulf Coast region and Northeast have been more than offsetting operationally-driven declines out of the Permian, Rockies and San Juan.”

January crude oil was trading 97 cents lower at $56.23/bbl shortly before 9 a.m. ET, while December RBOB gasoline was down about 3.9 cents to $1.5442/gal.