February natural gas is set to open 5 cents lower Wednesday morning at $3.04 as traders focus on a government inventory report that is expected to show sharply reduced gas usage. Overnight oil markets continued to tumble.

All it took Tuesday to send the market a dime lower was a slight modification to the longer-term weather outlook. The National Weather Service (NWS) eight- to 14-day outlook showed slightly less cold and greater warmth from Monday’s outlook. Monday’s forecast showed a broad ridge of below-normal temperatures north of a line extending from Montana to as far south as Kansas and Missouri and east to Delaware. Above-normal readings were expected south of a broad arc extending from northern California to North Texas and including South Carolina.

“Tuesday’s eight- to 14-day outlook moved the area of below-normal temperatures slightly to the north while the area of above-normal readings moved north as well,” the forecaster said.

In spite of forecasts calling for expansive cold across the nation, the NWS forecasts below-normal heating loads for the week ending Jan. 3 in key population centers. In a report it said New England should see 242 heating degree days (HDD), or 30 below normal, and the Mid-Atlantic should endure 228 HDD, or 24 below normal. The greater Midwest from Ohio to Wisconsin is expected to shiver under 281 HDD, or five below its normal tally.

Analysts are looking for a withdrawal figure in the Energy Information Administration’s (EIA) 12:00 p.m. EST release of inventory data in the neighborhood of 40 Bcf. By any measure a significant drop in the year-on-five-year deficit is likely. Last year, 108 Bcf was withdrawn and the five-year average is 114 Bcf.

IAF Advisors calculates a pull of 30 Bcf, and Ritterbusch and Associates calculates a withdrawal of 48 Bcf. Tim Evans of Citi Futures Perspective said, “Our storage model produced a somewhat larger 43 Bcf net withdrawal estimate, although we see no sure advantage in anticipating a surprise from the DOE. The larger fundamental concern, in our view, is that we now no longer see the cooler than normal temperatures in the forecast as producing enough heating demand to full offset the apparent growth in natural gas production.”

Evans figures show the year-on-five-year deficit contracting to just 54 Bcf by Jan. 16, and although he said the market “continues to become better supplied on a seasonally adjusted basis…at the same time, we do still see potential for prices to climb as heating demand picks up, translating into larger withdrawals in absolute terms, even though at a lower rate than past years.”

Evans suggests working a buy stop at $3.23 in the February contract as a way to enter the market on the long side, and he counsels a protective sell stop at $2.97 to limit risk on the trade.

In overnight Globex trading February crude oil fell $1.19 to $52.93/bbl and February RBOB gasoline shed 4 cents to $1.4340/gal.