In another disappointment for natural gas bulls in a winter largely devoid of serious cold, weather models over the weekend reduced the intensity of a stretch of frigid temperatures that had been expected this month, sending futures tumbling. The February Nymex contract was down 15.5 cents to $2.582/MMBtu at around 8:45 a.m. ET.

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Compared to forecasts late last week, the temperature outlook as of early Tuesday had “shifted solidly warmer,” according to Bespoke Weather Services.

Models over the weekend trended “more toward a dominant” positive Eastern Pacific Oscillation pattern and did so “while lessening the influence” of North Atlantic Oscillation blocking, Bespoke said. This would result “not only in less cold as we move into the latter part of January, but sets the stage to actually revert back warmer than normal into February.”

Still, Bespoke pointed to “some notable model differences,” with the European model “slower in completely eroding” the colder pattern compared to the American model.

“It is getting difficult to envision any sustainable rally at this stage, as the cold forecasts for the conclusion of this month are failing versus expectations from the other day, and we are already seeing signs of the turn back to a warmer than normal regime into February,” the firm said. 

Amid the “major shift” in forecasts, EBW Analytics Group estimated a cumulative decline of 70.2 Bcf of demand compared to projections prior to the holiday weekend, when models had “called for a sustained cold air connection to develop” to close out the month.

“With only three or four weeks left in the heart of winter, the stakes are high for natural gas,” the EBW analysts said. “The most likely solution is a middle ground, keeping prices near this morning’s level despite the continued erosion of the storage surplus.”

Noting the disagreement between the models, either the warmer scenario predicted by the American model or the cooler European outlook “is still possible — creating a wide range of possible outcomes, with gas prices potentially sinking into the $2.50s or moving back to the $2.80s or higher.”

From a technical standpoint, the sharp drop in prices over the long weekend had analysts at ICAP Technical Analysis focusing on potential support levels for the February contract.

“If this pullback is corrective in nature one of the remaining ratio retracements associated with the $2.263/2.238 lows should be able to limit any slide from here,” ICAP analyst Brian LaRose said.

LaRose pegged potential support levels at $2.569, $2.491 and $2.379.

“If these retracements cannot halt the retreat a drop to $2.182, even $1.852 will be back on the table,” the analyst said.

February crude oil futures were up 8 cents to $52.44/bbl at around 8:45 a.m. ET, while February RBOB gasoline was up fractionally to $1.5348/gal.