As the market prepared to digest the latest government inventory data, expected to show a hefty withdrawal from U.S. gas stocks, mixed overnight weather trends saw natural gas futures retreat in early trading Wednesday. The January Nymex contract was off 6.7 cents to $2.713/MMBtu at around 8:35 a.m. ET.

NGI Morning Natural Gas Price & Markets Coverage

After previously showing a warmer outlook compared to the European weather model, the American Global Forecast System (GFS) trended “notably colder” overnight to add 15 heating degree days (HDD), according to NatGasWeather.

However, the European model countered by dropping 8 HDD, bringing it close to the GFS.

“Prices gained overnight on the colder-trending GFS, then sold off after the European disappointed on warmer trends,” the firm said. “As we’ve been stating going back to last week, the weather has been inconsistent, flip-flopping between warmer and colder trends, and that continues.

“But it must be frustrating for natural gas bulls that the GFS finally trended considerably colder overnight only to have the European back off after being consistently colder every single run for more than a week.”

The January contract is coming off a 7.5-cent rally in Tuesday’s session, which analysts at EBW Analytics Group attributed to a combination of cold weather in forecasts over the next two weeks, rising prices in the physical market and expectations for a bullish withdrawal from the Energy Information Administration’s (EIA) latest storage report.

For this week’s report, scheduled for noon ET instead of its usual Thursday release due to the Christmas holiday, predictions have centered around a withdrawal in the neighborhood of 160 Bcf for the week ended Dec. 18.

A Bloomberg survey showed withdrawal expectations ranging from 146 Bcf to 180 Bcf, with a median of 159 Bcf. A Reuters poll, meanwhile, landed at a median withdrawal of 160 Bcf, with pull estimates spanning from 142 Bcf to 180 Bcf. A Wall Street Journal survey found an average withdrawal expectation of 159 Bcf. Estimates ranged from decreases of 146 Bcf to 179 Bcf.

NGI predicted a 159 Bcf withdrawal, above the 146 Bcf pull recorded a year earlier and higher than the five-year average 127 Bcf withdrawal.

“It was colder than normal over the interior U.S., South and Southwest” during this week’s EIA report period, “while warmer than normal over the far West, Midwest and Southeast,” NatGasWeather said. “Our algorithm predicts a 164 Bcf withdrawal, to the bullish side.”

A print close to 160 Bcf, in line with major surveys, could lift futures, according to EBW analysts.

“Even if the report disappoints, with daily withdrawals already at high levels and colder weather on its way, prices at Henry Hub, which averaged $2.77 yesterday, could continue to strengthen, helping to support futures,” the EBW analysts said.

February crude oil futures were up 11 cents to $47.13/bbl at around 8:35 a.m. ET, while January RBOB gasoline was up fractionally to $1.3453/gal.