Returning after the holiday weekend, natural gas bulls looked to regain control of the futures and cash markets on reports that the recent warm-up is expected to be short-lived for much of the country. NGI‘s National Spot Gas Average on Tuesday increased 9 cents to $3.60, and the January futures contract added 9.9 cents to close the day’s regular trading session at $3.761.

Next-day gas on a national basis was a sea of black ink except for a handful of individual points that recorded small losses. Most individual point gains ranged from a couple of pennies to a little more than a dime, except for points in Appalachia and the Northeast, where a forecasted return to winter-like temperatures spurred much larger increases.

In Appalachia, Texas Eastern M-2 30 Receipt added 24 cents to average $3.20, and Tennessee Zone 4 Marcellus and Transco-Leidy Line Line picked up 25 cents and 22 cents, respectively, to each average $3.18.

Gas for Wednesday delivery in the Northeast saw Algonquin Citygate being its normal volatile self with a 71-cent gain to average $5.62. Iroquois, Waddington added 29 cents to $4.72, and Transco Zone 6 NY increased 33 cents to average $3.58.

Turning attention to the natural gas futures arena, analysts see things lining up to at least support a short-term bullish case.

Analysts at Tudor, Pickering, Holt & Co. noted that the January futures contract on Tuesday morning was trading at $3.75, up 40 cents since the middle of last week. “Half of the gain came on the back of a strong storage print last week; 209 Bcf draw was a whopping 100 Bcf above norms on weather 25% colder than average,” they said in a note Tuesday.

“That big draw cut storage overhang by more than half week/week, leaving just 76 Bcf of surplus versus five-year norms. The balance of the price gain looks to be driven by another forecasted round of cold weather next week. While we remain bearish 2018 gas prices, near-term cold weather and tight underlying supply-demand supportive of a 1Q2017 $3.75/MMBtu price deck.”

After a significant warm-up in a number of population centers in the week running up to Christmas, it appears an upcoming temperature swing could put pressure on the high $3 level for front-month futures.

“Month-to-date, we have seen much below normal air dominate the North American climate,” said consulting firm EnergyGPS in a Tuesday morning report to clients. “The already tight natural gas supply-demand balance has only managed to get tighter because of the gain in weather-adjusted residential/commercial demand. After setting an all-time high this past November, the Lower 48 natural gas inventory has dropped back to the five-year average. The current withdrawal pace will set a new record for the month of December.

“This past holiday weekend saw many warm records fall across the Midwest. Parts of the Ohio Valley saw daytime highs in the low 70s [Monday], grinding residential/commercial demand to a stop.These conditions will be short-lived as another round of much below normal air is set to drift down from Canada in the same manner as it did during the second week of December. “While the temperature averages do not look as cold as what was experienced last time, it will push storage withdrawals once again to the 200 Bcf mark.”

Expected cold notwithstanding, traders see a market that is out of alignment and perhaps ripe for a trading opportunity. “This market continues to scream higher as it attempts to appropriately discount another blast of Arctic air that will be entering the nation’s Midcontinent in force next week,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note. “With weekend updates favoring extension of this below normal temperature pattern out to about the first one-third of January, the price spike that began about a week ago is being continued. The February futures contract that acquires prompt month status on Wednesday’s close has spiked into new high territory beyond $3.75 amidst significant strengthening in spread structure.

“But we will also note that the physical market is trading at a significant discount as a result of current mild temps in leaving open the possibility of a soft expiration that could see January futures shift back to a discount against February values. Overall, we are viewing this dramatic 40-50 cent price spike of the past week as mismatched against the updated temperature forecasts that we monitor. While another Arctic event is certainly headed across the nation’s midsection next week, deviations from normal thus far don’t appear as pronounced as the cold wave seen earlier this month.”

The National Weather Service (NWS) calculates a diminished year-end heating load. For the week ending Dec. 31, NWS forecasts New England will see 220 heating degree days (HDD) or 48 fewer than normal. The Mid-Atlantic is set for 195 HDD, or 54 fewer than its seasonal average, and the greater Midwest from Ohio to Wisconsin is anticipated to have 196 HDD, or 87 fewer than its normal tally.