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Forecasters Struggle With Warmer Outlook; August Seen 4 Cents Higher

August natural gas is expected to open 4 cents higher Monday morning at $2.81 as traders assess a weather picture featuring warmer temperatures but with a high degree of uncertainty. Overnight oil markets slipped.

Weather forecasters admit that the trend is to warmer temperatures in the near term, but their models are giving a lot of mixed results and don't paint a clear picture. "Over the weekend, we saw a good deal of sloshing, with notoriously fickle models like the GFS operational jumping around to all sorts of solutions even as early as the six-10 day range," said Matt Rogers, president of Commodity Weather Group.

"From what best we can assess, the South -- from Texas to the Southeast -- sees more heat potential over the next two weeks with more chances for 100-degree weather in Dallas (early next week after tomorrow's hit and then again in 11-15 day). The East Coast is not looking as hot this week as originally forecast (demand losses), but then trends hotter again this weekend into early next week, but we focus on warmer lows vs. highs given rain risks. The 11-15 day is also a mixed mess, but after a hiatus, we favor heat returning to the Southwest/California."

Market technicians see everything in place to indicate a trend to higher prices except the price action itself. "Let's recap," said Brian LaRose, a market technician at United ICAP, in closing comments Friday. "$2.641-2.616 held. The weekly candlestick can best be described as a doji hammer bottom. The long term RSI [Relative Strength Indicator] reading turned up precisely where it needed to. And the short-term technicals have swung to a bullish bias. From a technical perspective, bulls look like they are firing on all cylinders. But we do not have price confirmation; need a break above $2.890 to signal the bulls really are in control."

Mike DeVooght, president of DEVO Capital, continues to recommend trading accounts, end-users and producers stand aside the market.

In overnight Globex trading August crude oil shed 90 cents to $51.84/bbl and August RBOB tumbled a nickel to $1.9715/gal.

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