With updated forecasts still pointing to a return to more seasonal winter weather by late January following exceptional warmth to start 2023, natural gas futures eked out modest gains in early trading Wednesday.

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The February Nymex contract was up 9.1 cents to $3.730/MMBtu at around 8:50 a.m. ET.

Recent price action, with the February contract recording lows of $3.546 in Tuesday’s session and $3.559 in after hours trading, points to technical support in the $3.50 area, EBW Analytics Group analyst Eli Rubin said.

Weather-wise, recent forecasts as of early Wednesday modestly increased degree day expectations for the Jan. 20-26 storage period, suggesting a pattern shift from “scorching warmth” in the near term toward a “less extreme bearish setup” later this month, according to Rubin.

“Although a turn cooler into late January could help normalize supply/demand fundamentals, the extent of near-term warming has slashed seasonal supply adequacy fears, and Nymex risk premiums may struggle to rebound,” Rubin said. “Strengthening weather could stabilize the February contract, but March remains likely lower over the next 30-45 days.”

Looking at the bigger picture for natural gas, analysts at Tudor, Pickering, Holt & Co. (TPH) said that after a mild start to January they’re now modeling roughly 1.85 Tcf in storage exiting the winter withdrawal season, assuming normal weather for February and March. That’s up from previous estimates for inventories of around 1.65 Tcf.

The firm’s projections for supply growth in 2023 offer “little support to our projected inventory balances and outlook for price,” the TPH analysts said. “To that end, while we’d previously anticipated Henry Hub testing the low $3 range as we’d progressed through 2023 and a $2 handle tested in 2024, further supply growth and a slow start to winter could support testing a $2 handle to force a market rebalance earlier than anticipated — in 2H2023.”

As for overnight forecasts, the American and European weather models trended colder, according to NatGasWeather.

Models continued to show colder temperatures arriving over the Lower 48 Jan. 23-26 for stronger demand nationally, the firm said.

“Recent longer-range weather data continues to support at least a seasonal, if not a colder than normal, U.S. pattern for late January through mid-February,” NatGasWeather said. However, this is “in need of close watching due to the potential for large warmer or colder trends in time. But for now, Jan. 24-31 is still favored to bring stronger national demand.”