Natural gas futures pared their recent gains in early trading Wednesday as recent weather model runs lowered demand expectations for the next two weeks. After rallying 12.1 cents in the previous session, the February Nymex contract was down 4.4 cents to $2.658/MMBtu at around 8:50 a.m. ET.

NGI Morning Natural Gas Price & Markets Coverage

As of early Wednesday weather models had “backed off cold potential in a big way” over the previous 24 hours, according to Bespoke Weather Services. The firm said the American model had dropped more than 25 gas-weighted degree days (GWDD) compared to 24 hours prior, with the European model similarly losing nearly 20 GWDD.

Bespoke attributed the change in the forecasts to a “trend away from a neutral to negative” Eastern Pacific Oscillation (EPO).

“We would be cautious in accepting any solution by the modeling right now given such run-to-run volatility,” Bespoke said. “The look of the pattern, as depicted even in the overnight runs, is consistent with the pattern types that typically bring colder than normal weather, but the lack of a good cold source region, along with inconsistency in the EPO forecast, places confidence below average for now.”

Bespoke said there’s potential for Wednesday’s midday model runs to restore some of the recently lost demand to the outlook.

Analysts at EBW Analytics Group measured similarly large losses in projected demand from models over the previous 24 hours, including a drop of 25.6 gas-weighted heating degree days from the American model.

Still, the firm noted that the February contract was trading only modestly lower early Wednesday despite the lost demand from the outlook.

“Both models still call for an impressive cold air connection beginning 11-12 days from now,” the EBW analysts said. “If this validates, prices could still rise sharply later this month.”

Meanwhile, looking ahead Thursday’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for a 150 Bcf withdrawal for the week ending Jan. 1.

The firm estimated a nearly 15% jump in heating degree days for the report week, driving a 4.8 Bcf/d week/week increase in residential/commercial demand. This was partially offset by a 0.4 Bcf/d week/week holiday-related decline in industrial demand and exports to Mexico.

On the supply side, Energy Aspects estimated production at 91.3 Bcf/d as of year-end 2020, 0.8 Bcf/d higher month/month. However, production as of last week was down 1.0 Bcf/d from recent highs, including a 0.6 Bcf/d week/week drop in output from Appalachia, according to the firm.

February crude oil futures were up 24 cents to $50.17/bbl at around 8:50 a.m. ET, while February RBOB gasoline was up fractionally to $1.4597/gal.