Natural gas futures softened early Tuesday as the increasingly mild outlooks that long-term weather models had been portraying for weeks continued to trim demand. The January Nymex gas futures contract was trading at around $2.305 just before 8:30 a.m ET, down 3.6 cents from Monday’s settle.

Weather patterns trended notably milder on Friday and have continued to warm ever since, resulting in large losses in demand that natural gas traders appeared to ignore on Monday as prices rallied. Market observers pointed to other factors for the unusual price gain in the face of warmer forecasts, including a tighter supply/demand balance, speculative trading and seasonal buying ahead of the official start of winter this weekend.

However, prices have since sold off a few cents overnight with both the Global Forecast System and European models trending further warmer by more than 10 heating degree days, according to NatGasWeather. Essentially, an already bearish weather pattern continued to trend more bearish overnight.

“So it’s up to the natural gas markets to decide between very bearish weather patterns after Thursday or if tightening in the supply/demand balance, or whatever reasons drove Monday’s gains, will be strong enough to overcome it,” the forecaster said.

There are hints that colder air could filter back into the northern United States around Dec. 29-30 for a return to a more seasonal temperatures, according to NatGasWeather. “But even then, it’s still not nearly convincing enough to expect the markets to believe it, especially with a solid 10 days of bearish weather to come.”

Bespoke Weather Services agreed that some cold could return in final days of 2019 as tropical forcing signals cycle back around to a state that is more favorable for cold intrusions, but it is not clear the chillier air would arrive immediately in the first week of the new year.

“Given that models typically are too fast with changes, we could make the case that any true change would be delayed until after the first week of January,” Bespoke chief meteorologist Brian Lovern said.

Tuesday’s trading behavior “will be quite interesting” as $2.30 for the January Nymex futures contract once again seems to be the level bulls and bears hope to control, “with bulls having the early edge this week but seemingly losing it so far overnight,” NatGasWeather said.

Meanwhile, supply/demand balances, while still solid, were not quite as strong Tuesday morning as they were in recent days, according to Bespoke. Production remains off highs, but liquefied natural gas (LNG) is lower based on preliminary data and power burns are not as strong as they were previously when there was a similar gas-weighted degree day count.

On the LNG front, U.S. exports that have hit multiple records in recent weeks could begin to slow a bit as Europe increasingly appears to be running down spare regasification capacity and storage. The continent’s stocks are a huge 670 Bcf higher year/year, according to Energy Aspects.

“Sendout at half of Europe’s LNG import facilities has risen to near capacity in recent days, leaving fewer destinations for shippers to deliver incremental supply over the rest of winter,” the firm said. “Much of this remaining capacity is at UK terminals.”

Of the terminals with remaining spare capacity, there are a number of factors that could prevent greater capacity utilization, according to Energy Aspects.

Spain is experiencing a recovery in hydroelectric reserves and is already exporting gas at the French border. Greece has spare capacity and appears to be stockpiling LNG in case a gas disruption stems from the ongoing negotiations between Russia and Ukraine, but if that transit continues undisrupted, Greece will struggle to take in more LNG, especially as it is not well connected enough to the grid to deliver to major European demand centers, Energy Aspects said.

At around 8:30 a.m., crude oil futures were trading at about $60.50/bbl, up 29 cents day/day. RBOB gasoline futures were about eight-tenths of a cent higher at $1.67/gal.