December natural gas is set to open 9 cents lower Wednesday morning at $2.81 as updated weather models show ongoing warmth with little likelihood of tapping into any cold air anytime soon. Overnight oil markets fell.

Tim Evans of Citi Futures Perspective forecasts ongoing storage builds into the middle of November and an implication of downward price pressure. Evans is looking for a build of 56 Bcf in this week’s storage report and says this is pretty much in line with industry estimates. “The market’s greatest worry is the forecast for warmer than normal temperatures into the middle of November.”

He sees “the year-on-five-year average storage surplus that was 182 Bcf on Oct. 21 would decline to 175 Bcf in Thursday’s report, but then trend higher to 260 Bcf as of Nov. 18. The rising surplus confirms the market is becoming better supplied on a seasonally adjusted basis, putting downward fundamental pressure on prices. This forecast would also result in a new record high storage of 4,070 Bcf on Nov. 11. Overall, we think December futures could fall into the $2.50 to $2.75 range given this outlook.”

Evans recommends holding on to an earlier short position established in the December contract at $3.34 with a protective stop at $3.22 to ensure some additional profit on the trade.

Forecasts just keep getting warmer. “[Wednesday’s] 11-15 day forecast is also warmer than yesterday’s forecast over the eastern two-thirds of the nation,” said WSI Corp. in a morning report. “As a result, CONUS GWHDDs plunged by 7.2 for days 11-14 and forecast to be 64.4 for the whole period. This is 27.5 below average. The forecast confidence is only near average as models continue to highlight a warm cyclical, positive PNA [Pacific North American] driven pattern. There are typical technical differences throughout the period and signs of retrogression late.

“Seems hard for there to be warmer risks given the changes, but the ECMWF [European] guidance is even warmer than the forecast. A typical positive PNA offers a colder risk across the southern and eastern U.S., but there is not much cold air over Canada to tap into,” WSI said.

Market technicians see an ongoing downtrend with the bullish case requiring some heavy lifting to get reinstated. “A little concerned with some of the divergences we are seeing as a result of Tuesday’s fresh lows in the December contract,” said Brian LaRose, a market technician at United ICAP, in closing comments Tuesday.

“That said, bulls would need to lift natgas back above $3.100-3.130 to make a case for some sort of bottom being forming. As long as the bears can prevent that from happening the trend will point down. [We] see $2.832-2.823 as the next challenge for the bears in this situation.”

In overnight Globex trading December crude oil fell 71 cents to $45.96/bbl and December RBOB gasoline shed a penny to $1.4774/gal.