January natural gas is set to open 8 cents lower Tuesday morning at $3.93 as traders see weather and technical factors working to suppress any meaningful market upside. Overnight oil markets fell.

A weak weather outlook combined with a compromised technical picture sets the market up for another 20-cent decline. “Consensus of forecasts suggests above — much above temperature patterns across almost the entire U.S. with extension out to about the middle of this month,” said Jim Ritterbusch of Ritterbusch and Associates.

“This virtually assures a three-week string of smaller than normal supply draws that will be kicked off on Thursday with a figure that could fall short of last year’s 141 Bcf decline by triple digits. A number smaller than the five-year average of about 50 Bcf would also appear tabled based on last week’s warmer than normal temperature trends that likely combined with a rebound in production following some temporary well freeze-offs and pipeline issues.

“A violation of our expected support at $4.05 shifts the technical picture considerably, and a further slide to around the $3.70-3.75 zone is certainly possible by week’s end if the mild temperature forecasts stretch into the third week of December. Our very short-term bias is to the downside in view of the updated temperature views. But we would continue to caution against entry at current levels given the extreme two-sided volatility that has developed during the past month as a result of rapidly changing temperature patterns.”

Technical analysts see a buying opportunity in the cards. “Last year from 12 December to 21 January, natgas congested between $4.532 and $3.953. On 22 January, natgas broke out of this consolidation range,” said Brian LaRose of United ICAP. “The rally ended on 24 February at $6.493. So far, this year’s price action is playing out in a very similar fashion. So, are the fireworks about to begin? If so, this year’s seasonal target is $7.330. We reiterate our scale down buy recommendation,” he said in closing comments Monday to clients.

Overnight weather models suggest forecast warmth might be somewhat overdone. “While a warm-prevailing pattern persists for the first half of December, the dynamic models did pull back on the warmth intensity somewhat over the past 24 hours, justifying a slight increase in overall national demand for today’s forecast,” said Matt Rogers, president of Commodity Weather Group, in the firm’s Tuesday morning forecast.

“The Midwest, East and South see slight colder changes today while the West is same to slightly warmer overall,” he said. “The European model guidance has been cooling the most in the past day or two with the European operational even favoring near-30-year normal anomalies for most of the Midwest, East and South (cooler Texas) next week. Indeed, there is mounting concern that the models may be misreading tropical forcing influences that could continue these cooler trends for next week into the middle of the month as the main warm ridging may shift more north and west than the models are currently anticipating. This still does not open bigger cold air supply, but it limits the warmth potential, too.”

In overnight Globex trading January crude oil fell 63 cents to $68.37/bbl and January RBOB gasoline retreated a penny to $1.8685/gal.