January natural gas futures were down 14.5 cents to $4.262/MMBtu shortly before 9 a.m. ET Wednesday as forecasters pointed to guidance showing warmer conditions could linger to the end of the month.

Models continued to diverge overnight, according to Bespoke Weather Services.

The Global Ensemble Forecast System (GEFS) leaned colder, while European guidance showed “even more impressive warmth, indicating that ridging could build across the East in the long-range and allow warmth to dominate through much of Week 3 and likely into the end of December.”

Early morning GEFS guidance “backed off most of the cold risks” as “European guidance seems to have a better handle on tropical forcing and the overall pattern, leading us to still weight it heavier in our forecasts, despite its poor November performance,” the forecaster said. “This indicates rather limited cold risks through the remainder of December, which better fits our expectations overall, though climate guidance and a wide array of atmospheric indicators still show that cold should quickly return as we move through early January.”

Meanwhile, looking further along the strip, the market appears to be “sensing some upward price risk” for the 2019 injection season contracts, which have gained since late November, according to Energy Aspects.

“Our current view still places end of March inventories at 1.3 Tcf. That figure is based on 10-year normal weather and makes no assumption for freeze-offs or other winter weather disruptions to production, suggesting there is downside risk to that number,” the firm’s analysts said. “Our current view is that end of March inventories are thinly balanced. If we assume 70 Bcf of freeze-offs over winter (which would be at the higher end of typical interruptions over the last few years), our balances would still be thinly balanced near 1.23 Tcf.

“Importantly, though, there has been no major shift in our end-March storage inventory projection since late November,” the Energy Aspects team said. “At this point, there remains a risk that end of March storage could move from thinly balanced to too low. By that token, the end of March could still move from thinly balanced to a carryout that would begin to look high for the fundamentals. We expect this summer to remain heavy on supply, with production  gains forecast on the order of 6.5 Bcf/d year/year (y/y).”

The prospect of hot weather this summer driving strong power burns, combined with a 1.3 Tcf end of March carryout, means $3.00 peak summer prices are “not implausible,” according to the firm.

“Given how sticky power burn has been versus modelling, a view that strength will extend into gas power demand this injection season versus some models calling for a y/y decline could also be taking hold,” Energy Aspects analysts said. “Prices have also had to climb higher to bring on incremental coal, a factor that will be exacerbated by mid-2019 due to further unit retirements.”

Looking at the technicals, heading into Wednesday’s trading analysts with Rafferty Commodities Group pegged major resistance levels at $4.627 and $4.660. The Rafferty team’s major support levels were $4.095 and $4.000, with minor support at $4.360, $4.230 and $4.204.

“The $4.236 area has been acting as support on pullbacks,” the analysts said, adding that the recent consolidation pattern in the January contract will “likely conclude with an upside breakout.”

January crude oil was trading $1.02 higher at $52.67/bbl shortly before 9 a.m. ET, while January RBOB gasoline was up about 2.7 cents to $1.4665/gal.