Although some cooling toward mid-April has added demand to the outlook, natural gas futures were trading slightly lower early Wednesday as deficits were set to shrink over the next few weeks. The May Nymex futures contract was off 1.1 cents to $2.673/MMBtu shortly after 8:30 a.m. ET.

With Tuesday’s selling occurring despite some further colder trends in the forecasts, NatGasWeather said the rally earlier in the week might have been a “technical bounce” and not driven by weather trends.

The overnight data from the European and Global Forecast System models trended somewhat colder for the mid-April period, “continuing to advertise a steady barrage of weather systems over the central and northern U.S. with widespread showers and cooling in a very active but typical spring pattern...this April 10-17 period has added quite a bit of demand, yet prices have failed to respond so far and are back just above multi-month lows in overnight trade,” NatGasWeather said.

The pattern would be more impressive if not for “mostly comfortable” temperatures forecast for the southern United States, according to the forecaster.

“While the overnight weather data was a touch cooler trending April 10-17, no major changes bigger picture, as supplies hit the lows of the year” in last week’s Energy Information Administration storage report at 1,107 Bcf, NatGasWeather said. The Lower 48 is “sporting hefty deficits of minus 521 Bcf that will now improve back toward minus 430 Bcf after the very warm U.S. pattern plays out this weekend through early next week.

“Thereafter, deficits could stall for a few weeks as builds are more likely to come in closer to normal due to just enough cooling arriving” across the northern United States in mid-April.

Meanwhile, in a clear illustration of the potential inverse relationship between crude oil and natural gas prices amid supply growth in the U.S. onshore, a glut of associated gas output continued to crush spot prices in the Permian Basin Tuesday.

Day-ahead deals at Waha were priced as low as negative $6.600/MMBtu Tuesday, dropping well below the previous record-setting nadir of $2.500 observed only last week. Waha finished Tuesday's trading averaging a jaw-dropping negative $3.610.

“Before about two weeks ago, no U.S. hub had ever averaged a negative cash price,” noted Genscape Inc. analyst Joe Bernardi. “Then, from trade date March 21 on, but excluding yesterday’s trade date, Waha cash averaged negative 47.0 cents. To fall from this already unheard-of negative average by more than an additional $3 highlights the uniqueness of the current price environment in the highly constrained Permian. Permian hubs in addition to Waha -- such as El Paso Permian and Transwestern -- have moved similarly into completely uncharted territory.

“Our Permian production estimate has been down somewhat over the last several days compared to March’s monthly average, but as is typical for the beginning of the month, we have also seen upward revisions to these numbers,” Bernardi said.

May crude oil futures were trading about 5 cents higher at $62.63/bbl just after 8:30 a.m. ET Wednesday, while May RBOB gasoline was up fractionally to $1.9336/gal.