Nymex July natural gas was set to open more than a penny lower at $2.87 as additional cooling showed up in overnight weather forecasts for the second half of June.

Weather forecasts overnight increased cooler trends later in the medium-term and into the long-term, although guidance showed some slight warming trends from June 12-15 as an initial cold shot across the center of the country appeared less strong, Bespoke Weather Services said. Both European and American guidance, however, were then quicker to return cooler air by June 16-17, with a broad trough centered across the Midwest.

“Cool weather may struggle to penetrate into the South, where temperatures around to slightly above average should work to keep cooling demand nationally near normal. However, it is clear that the upcoming two weeks will not feature the cooling demand that once appeared possible, with the hottest risks now arriving later in the week three forecasts,” Bespoke chief meteorologist Jacob Meisel said.

As for Wednesday’s trading action, Bespoke said although the prompt-month has been bouncing off technical support seen recently in the $2.87-2.90 range, recent forecast developments have been bearish enough for it to hold its slightly bearish sentiment given supply/demand balances that still do not impress and increasing injection expectations during the next couple of weeks.

“We are looking for a bit of cash strength once liquefied natural gas exports ramp up again, and we could see a small bounce towards $2.92 or even $2.95, but any move approaching $2.95 should fail,” and eventually $2.87 appears at risk this week given rather significant gas-weighted degree day losses, Meisel said.

Meanwhile, Mobius Risk Group analysts said the bearish weather sentiment has likely led market bears to add positions after reducing exposure by 40% since early May. The most recent Commodity Futures Trading Commission Commitment of Traders report indicated that net speculative length stood at 188,000 lots, which was about 100,000 lots more than the May 8 reporting period. Seventy percent of the change in net speculative length was driven by reduced short positions, the Houston-based firm said.

Of course, all eyes will be on Thursday’s storage data from the Energy Information Administration (EIA). Early estimates show a build in the mid-90 Bcf range. Should EIA data hit expectations and weather trends hold, Bespoke said it would watch for a $2.82 test fairly soon, a target level that appears attainable without long-range heat. “Once long-range heat risk arrives, $2.82 (or $2.75) could become buying opportunities, but with current weather risk appears still lower,” Meisel said.

NatGasWeather said, however, that the background dynamic remains bullish with storage deficits set to remain near or more than 500 Bcf through the next three to four storage reports. Any prolonged selloff would be unlikely until strong production shows signs of meaningfully reducing deficits.

“Until this occurs, prices could remain in the recent $2.85-3.00 trading range, with the direction of the break-out based on whether temperatures east of the Plains in late June and early July end up hotter or cooler than normal,” the forecaster said.

July crude oil was set to open about 48 cents lower at around $65.04/bbl, while July RBOB gasoline was trading about 1.3 cents lower at around $2.0929/gal.