August natural gas is expected to open 2 cents higher Wednesday morning at $2.74 as analysts see a period of near-term market strength driven by high power loads followed by plump storage going into the fall. Overnight oil markets were mixed.

Analysts in the near term see the market entering a period of upside potential, but things could get ugly toward the end of the injection season. “The combination of a return to production above 72 Bcf/d and the relatively mild 15-day weather outlook means that the ledger should see some relative stability over the next couple of weeks,” said Breanne Dougherty, an analyst with Societe Generale, in a recent report.

“However, given the underlying strength of power loads, there is significantly more risk to tightening than loosening from middle of July through to the end of August. We expect the storage pace to slow consistently relative to last year.

“Our end-of-October storage level continues to tease the 4.1 Tcf mark. This is not only a record level, but a threshold that we think will be critical if breached when it comes to fall and 4Q pricing dynamics. While the capacity to inject beyond this level is there, we anticipate some containment pressure-type pricing behavior if the trajectory outside the core summer looks too strong.

“Late in the summer (watch mid-September) the market needs an incentive to inject if storage looks flush. That traditionally materializes as downside front-month pressure,” she said.

Market bears hoping for any great attenuation in cooling requirements may have to bide their time. For the week ended July 11, the National Weather Service (NWS) forecasts above-average cooling requirements in major population centers. New England is expected to endure 61 population-weighted cooling degree days (PWCDD), or 24 more than its average. New York, New Jersey and Pennsylvania are expected to see 65 PWCDD, or 12 above their seasonal norm, and the greater Midwest from Ohio to Wisconsin is forecast to receive 59 PWCDD, or six above its seasonal tally.

MDA Weather Services in its morning six- to 10-day outlook said the models were generating “lower than normal confidence,” but the end result was normal temperatures over a wide section of the country.

In overnight Globex trading August crude oil fell 16 cents to $52.17/bbl and August RBOB rose 3 cents to $1.9863/gal.