Coming off a bullish inventory report, and with hints of cold returning in early January, natural gas futures were trading higher early Friday. At around 8:40 a.m. ET, the January Nymex contract was up 5.2 cents to $2.325/MMBtu.

The early gains Friday were “largely technically driven,” according to analysts at EBW Analytics Group. The firm modeled day/day demand losses based on the latest temperature outlook through Jan. 2.

However, the move higher “is reinforced by model runs that show an increased risk (still less than 50%) of the potential for temperatures to return to seasonal norms in early January,” the EBW analysts said. “Natural gas prices will be heavily influenced by midday model runs and even more by continued shifts in ensemble model runs over the weekend.

“By early next week, the January contract could fall to as low as $2.20 or test resistance at $2.38, depending upon how the uncertainty regarding early January sorts out.”

The latest European model data still showed an “exceptionally bearish pattern” through the end of the month, according to NatGasWeather. The American model added back some heating demand overnight but also “remains exceptionally bearish” over the next 11 days, the forecaster said.

“Most of the weather data continues to favor colder air finally returning into the northern U.S. Jan. 1-4, but still quite mild elsewhere,” NatGasWeather said. Both American and European datasets show national heating degree days running significantly warmer than normal over the next 15 days and “are as bearish as they’ve been in months. Yet buyers keep stepping in anytime prices dip several cents under $2.30.

“...Over the weekend, weather patterns are going to need to look much more intimidating if bearish weather headwinds are finally to end...Also of consideration, speculators remain heavily short with expiration of January 2020 late next week, so players could need to reposition today knowing lighter trade will be coming next week due to the holiday.”

Meanwhile, analysts have been mulling the balance implications of Thursday’s Energy Information Administration (EIA) storage report, which surprised the market with a triple-digit withdrawal. EIA reported a 107 Bcf pull for the week ending Dec. 13, compared with a 132 Bcf withdrawal recorded in the year-ago period and the 112 Bcf five-year average draw.

Total working gas in storage as of Dec. 13 stood at 3,411 Bcf, 618 Bcf higher than the year-ago period and 9 Bcf below the five-year average, according to EIA.

Analysts at Raymond James & Associates Inc. had pegged consensus estimates at minus 89 Bcf for the week, putting the actual figure nearly 20 Bcf bullish to expectations.

“Excluding weather-related demand, Thursday’s withdrawal implies that market demand was 2.57 Bcf/d tighter versus the same week last year and has averaged 0.26 Bcf/d tighter over the past four weeks,” the analysts said.

February crude oil futures were off 18 cents to $61.00/bbl at around 8:40 a.m. ET, while January RBOB gasoline was trading fractionally higher at $1.7132/gal.