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September Natural Gas Set to Open Lower as Near-term Cooling Halts Six-Day Rally

September natural gas prices were decidedly in the red ahead of Friday’s market open, trading 3.5 cents lower at $2.92, as traders banked on cooler weather and lighter demand for the weekend and in the weeks to come.

The latest weather models remained volatile as overnight European guidance trended warmer again, essentially cancelling out the cooler trends seen Thursday afternoon, Bespoke Weather Services said. Volatility is expected to continue into next week given an active Pacific and noisy upstream pattern.

“On net, we still appear slightly cooler than yesterday through the long range, and we note more cool risks in the medium and especially long range” that led Bespoke to see guidance trend cooler again Friday afternoon, chief meteorologist Jacob Meisel said.

“Additionally, confidence only continues to increase in cooler weather across the South and portions of the Southwest, with the Midwest the main battleground for now.” Confidence in cooler risks into week 3 also continues to grow with a strong Pacific/North American ridge.

With the end of summer near, natural gas futures are likely to start eroding soon, EBW Analytics said. Extreme hot weather is not yet over, though, and prices at Henry Hub continued to climb Thursday -- averaging $2.985. “Near-term, therefore, gas could trade in a narrow range,” EBW CEO Andy Weissman said.

As for Friday’s trading action, Meisel said the futures strip does not appear particularly supportive, indicating that $2.98-3.00 resistance should easily hold, and with cash prices likely not being as strong into a weekend with cooler weather, “we would look for some weakness today.”

That said, weather firmed up a bit, and the weather forecaster is seeing early indications that production did not grow quite as much as expected the last couple of days. Should the strip strengthen, Bespoke said there could be a test of resistance off this data, especially following Thursday’s Energy Information Administration 46 Bcf storage print.

The weather forecaster is looking for afternoon weather guidance to cool, and if power burns loosen again, September prices may pull back toward $2.90-2.92. “This production trend has our sentiment tick neutral and trading may be range-bound, but risk is still lower into early next week,” Meisel said.

Crude oil futures were trading 41 cents higher at $67.22/bbl, and RBOB Gasoline futures were trading 2.26 cents higher at $2.0225/gal.

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