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Weather Outlook Little Changed; July Relaxes 4 Cents

July natural gas is expected to open 4 cents lower Tuesday morning at $2.43 as overnight weather data showed little change and buyers face a technically overbought market. Overnight oil markets rose.

Weather models overnight were largely unchanged. Harrison NY- based Bespoke Weather Services said, "[W]eather model guidance continued to be mixed, though we still see enough long-range signs to expect a cooler end to June despite forecast heat in the eight-15 day timeframe across a couple different parts of the country.

"Overnight forecasts across the Midwest and South warmed slightly, while forecasts across the entire East Coast gradually cooled as models focused on more trough action over the western Atlantic in the eight-13 day timeframe. The result appears to be a relative net neutral for the natural gas market, though the introduction of some of the eastern trough action will likely limit how far prices are able to advance from here already being in overbought territory."

Traders see the temperature outlook as the primary short-term driver. "We look for the hot temps that will be entering the Midcontinent in force later this week to remain as the key source of support with Thursday's storage data having only minor price impact," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Monday.

"The contraction in the surplus against average levels should prove relatively small, but focus has already shifted beyond this week's report and toward a couple of EIA releases later in the month that will be showing some sharply downsized supply builds. Meanwhile, structure continues to strengthen as the physical market responds to the warmer temps. But while we have considered bull spreads recently as a conservative approach to the long side, we are hesitant to chase these trade at current levels."

Tropical Storm Colin continues to sprint out to sea. The National Hurricane Center in its 8 a.m. EDT report said load-killing Colin was about 75 miles south of Wilmington, NC, and was headed northeast at 33 mph. Maximum sustained winds were estimated at 50 mph.

In overnight Globex trading July crude oil added 52 cents to $50.21/bbl and July RBOB gasoline gained 2 cents to $1.6052/gal.

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