Physical natural gas for Wednesday delivery inched lower in Tuesday’s trading, lured by an unsupportive screen and weather forecasts calling for only nominal temperatures. Gains at Northeast points and Southeast points were unable to offset pervasive weakness in Texas, Louisiana, the Midwest and Midcontinent, and the NGI National Spot Gas Average fell a nickel to $2.81.

Futures traders were more focused on medium-term weather, or the lack thereof, at a time when market dynamics typically start to incorporate warmer temperatures and subsequent increased power loads. At the close July had fallen 16.5 cents to $3.145, and August gave up 16.4 cents to $3.181. July crude oil fell 14 cents to $49.66/Bbl.

In spite of the double digit drop by the July contract, traders didn’t see any fundamental change to sway them from their assessment of a broad trading range. “We are still stuck in the range,” a New York floor trader told NGI.

“We’ll probably hold right around the support level at $3.14. Under that $3 is the big number and $3.50 on the upside.”

By the open of trading July had already tumbled about 12 cents as followers of updated weather models had sold. Traders were forced to digest weather forecasts calling for cooling right at the time when summer power generation demand normally kicks in. Overnight oil markets retreated.

Forecasters are calling for a cooling trend toward the middle of June. “The latest 11-15 day period forecast is also a little cooler than previous forecasts over the eastern two-thirds,” said forecaster WSI Corp. in a morning report to clients. “[Continental United States population-weighted cooling degree days] are down 1.2 from yesterday’s forecast and are now forecast to be 33.6 for the whole period.”

WSI points out that the forecast could trend either cooler or warmer. “A slower transition, weaker tropical forcing and the ECMWF [European model] supports a cooler risk over the East. The GFS [Global Forecast System] guidance and La Nina like tropical forcing offers a warmer risk much of the period.”

Analysts see the market as a tug-of-war between increasingly bearish short-term weather and a long-term supply surplus that continues to shrink. “This market continues to zig and zag but with an increasing downward bias,” said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients. With the passing of the Memorial Day holiday, the temperature factor will take on increasing importance, and at the present time, the short term one- to two-week temperature views appear skewed decidedly in a bearish direction.

“Weekend updates are favoring unusually mild patterns across the eastern half of the U.S. that should keep [cooling degree days] downsized at a time when air conditioning requirements are usually beginning to ramp up electric generation demand. However, downside follow-through remains elusive given the bullish dynamic of a contraction in the storage surplus that is likely to be sustained through this week’s data. A repeat of last week’s contraction in the supply deficit of around 17 Bcf will likely be equaled or exceeded in the process of pushing the supply overhang down toward about 220 Bcf. But we also believe that continued mild Midcontinent temps that could be extended into mid-month by the middle of this week could provide a footing for a reversal of this spring pattern with the surplus potentially expanding. Such a development could set the stage for some downside follow-through in the newly prompt August contract to as low as the $3.05 area where we may look to approach the long side.”

Ritterbusch sees trading opportunities for nimble traders willing to work both sides of the market. “We are viewing this market as one that can potentially be worked from both sides next month since we are also viewing any price advances toward the $3.55 area as a short-term selling opportunity. We will also be monitoring the fall 2017-winter 2018 spreads for an opportunity to buy the front and sell the back months in anticipation of some tightening in the supply/usage balances during the upcoming summer.”

In the cash market deliveries to Transco Zone 6 New York proved to be one of the few gainers as cool fronts accompanied by higher forecast power loads were able to prompt incremental purchases of gas for power generation.

Gas for delivery on Transco Zone 6 into New York City rose a stout 24 cents to $2.60. Deliveries on Tetco M-3, however, were off 7 cents to $2.35.

The New York ISO forecast Tuesday’s maximum power load of 17,163 MW would reach 18,655 MW Wednesday and 18,726 MW Thursday. The PJM Interconnection predicted peak load of 30,720 MW Tuesday would climb to 32,514 MW Wednesday and 31,959 MW Thursday.

The National Weather Service in New York City predicted that a “weak low pressure [would] pass well south of Long Island along a stationary front overnight allowing the flow to become more southerly on Wednesday resulting in Summer-like weather. A cold front will then approach Wednesday afternoon and move through late Wednesday night, followed by high pressure for Thursday and Thursday night. Another cold front will move into the area late Friday night into Saturday morning, and remain nearby through the weekend.”

Other market points were mostly lower. Gas at the Algonquin Citygate shed 8 cents to $2.42, and deliveries to Dominion South were quoted 9 cents lower at $2.31. Gas at the Chicago Citygate fell 6 cents to $2.90 and packages on El Paso Permian came in 4 cents lower at $2.66.

Gas at the Henry Hub changed hands 6 cents lower at $3.05 and parcels on Kern Receipt eased 3 cents to $2.72. Gas priced at the SoCal Border Average fell 4 cents to $2.78.