After three days of dramatic swings, natural gas winter prices appeared ready for another round of volatility Wednesday as January teetered around a nickel lower early before plummeting about 20 cents just ahead of the session’s open.

The Nymex January contract, which surged 30 cents on Tuesday, was trading 20.1 cents lower at $3.637 at around 8:30 a.m. ET Wednesday morning.

The steep decline once again could be because of a technical driver, as weather outlooks turned slightly colder for the medium term. Most overnight weather models added several heating degree days (HDD), including for the last few days of December into early January, but it’s still not a cold enough forecast to be considered bullish, according to NatGasWeather.

“Overall, national demand will be quite light and bearish the next 10 days then increasing toward normal/neutral as a little stronger cooling arrives across the northern U.S. to close out the month,” the forecaster said.

Still, Mobius Risk Group analysts do not view the pending two-week stretch of weather, slack holiday demand or the recent move below $4 as an indication that market conditions have seen a structurally bearish shift. “Our view is that the sharp correction over the past week is more a reflection of position squaring ahead of the holiday.”

Liquidity will likely begin fading as this week progresses, and trading will be light between Christmas and the New Year’s Day holidays, according to the firm. “This dynamic encourages market bulls to lock in profits and exit long positions. According to the U.S. Commodity Futures Trading Commission, net speculative length neared 12-month highs over the past few weeks,” analysts said.

Furthermore, a weather normal environment from January to March may lead to a withdrawal season-ending inventory level of just above 1.1 Tcf. The estimate is based on Mobius’ view of current weather-adjusted supply and demand.

“A season-ending level this low would likely be uncomfortably low, and thus even a modest colder shift to weather forecasts could drive a very sharp retracement of the recent price decline,” analysts said.

While overnight weather guidance added some cold risks in the medium range, longer-term forecasts showed increased signaling for eastern ridging to linger into Week 3, which could keep gas-weighted degree days below average nationally through the first week of January, according to Bespoke Weather Services. The hint of mild temperatures lasting into the new year also likely weighed on the market.

“Our sentiment remains neutral in this erratic natural gas market, though like yesterday afternoon, we still favor short-term downside for prices before any broader rally as yesterday’s weather-driven rally appeared premature,” the firm said.

Crude oil January futures were trading nearly 30 cents higher at $46.52/bbl, and RBOB Gasoline prompt-month futures were trading fractionally higher at $1.353/gal.