July natural gas is expected to open 3 cents higher Monday morning at $4.57 as traders focus on near-term warming and discount longer-term forecasts of seasonal weather. Overnight oil markets were mixed.

Forecasters see nothing on the longer-term horizon to elevate demand and diminish storage injections above and beyond seasonal levels. “With it officially meteorological summer now, we still do not see any significant heat concerns for the Midwest and East over the next few weeks,” said Matt Rogers, president of Commodity Weather Group.

“A quick burst of warmth delivers mainly some upper 80s to the lower Midwest to lower Mid-Atlantic with a little bit of humidity, but the six-15 day looks mainly near seasonal overall with no significant cooling demand concerns and probably a bit more cooler risks at times with precipitation issues. Texas is hotter this week with middle 90s for Dallas and low 90s in Houston, especially for the second half. They look to take a break from those levels in the six-10 day but could inch back that direction again in the 11-15. The West sees the stronger heat potential, but it is mainly in the interior with the Desert Southwest the main hottest focus, while coastal SoCal holds cooler again.”

Mike DeVooght of DEVO Capital Management is looking for rallies as hedging opportunities. “We would use rallies approaching $4.60-4.80 on the summer natural gas strip as an opportunity for producers to lock in forward sales, primarily using floors and collars,” he said in a monthly report to clients.

For the moment, he suggests trading accounts to hold short a July futures position rolled from when April was at $5.00 to $5.10, and end-users should stand aside. Producers and those with exposure to lower prices are counseled to hold short the remainder of a May-October strip initiated at $4.20 to $4.30 as well as a second summer strip sold at $4.50.

Raymond James is raising its rig forecast, but it has less to do with the natural gas outlook than activity elsewhere. “[T]he recent surge in U.S. horizontal activity has surpassed even our expectations. Accordingly, we are raising our 2014 U.S. rig forecast from 1,806 rigs to 1,849 rigs (which is up 5% y/y vs our previous 2.5% y/y growth),” the company said in a report.

“More importantly, we are raising our U.S. horizontal rig forecast from 11% y/y growth to 14% y/y growth (or y/y growth of an average of 153 versus our prior growth estimate of 123 horizontal rigs). While there are many moving parts driving our rig forecast (e.g., pad drilling, infrastructure bottlenecks, higher completion spending, etc.), the focal points for this upward revision are 1.) the Permian, 2.) the Permian, and 3.) the Permian. Of course, it is not that simple, but the message is that the majority of horizontal expansion (or the driver of new-builds/equipment repositioning) is going to hit the Permian.

“Surprisingly, the Marcellus does not help our 2015 rig forecast: With natural gas storage levels left lower due to unusually large winter withdrawals, the market should pull the Marcellus to produce more gas. While the gas is there, we don’t think additional takeaway capacity will be there to the point where drilling activity will surge. With additional takeaway capacity build-outs already projected to be 100% utilized, we cannot justify horizontal rig growth in the latter half of 2015. We are modeling about 5% growth in 2015 (about five rigs),with all of this growth happening at the beginning of the year.”

In overnight Globex trading July crude oil rose 3 cents to $102.74/bl and July RBOB gasoline fell a penny to $2.9635/gal.