August natural gas is expected to open 3 cents lower Monday morning at $2.94 as overnight weather models lower temperature forecasts to seasonal levels. Oil markets were narrowly mixed.

Cooler temperatures in the near term are expected in key energy markets. "Much of the change in the forecast in each period is related to an active storm pattern in the Pacific, with the result being cooler adjustments across the Eastern Half," said MDA Weather Services in its morning report to clients. "Temperatures are forecast to average near normal from the Plains points east during this time frame, with cooler leanings accompanying high pressure into the Midwest early and again late in the period--and models suggest temperatures could still be cooler under these highs.”

Their data shows that “above normal temperatures will be the story in the West, where a few days of MA's are forecast in California from mid-late period under a strengthening ridge.” Risks to the forecast are in the cooler direction in the Eastern Half, "where models project more slightly below normal coverage. GFS [Global Forecast System] is stronger with ridging over the Southwest, a hotter risk for there."

Risk managers noting the glaring failure of the market to respond to last week's supportive storage data and a general pattern of above-normal temperatures say it’s time to consider lower prices. "With the second failure to rally above the $3.10 level, especially with the warmer than normal temperatures, there is a good chance we can revisit the $2.80 - $2.85 level in the near future," said Mike DeVooght, president of DEVO Capital. "On a trading basis we will hold current hedge positions and will stand aside for speculators."

Others are more bullish. Tom Saal, vice president at FCStone Latin America in Miami in his work with Market Profile weekly data says to expect the market to test last week's value area at $3.102 to $3.024. Saal also says another likely target is an area of "minus development" at $3.18 to $3.15.

In overnight Globex trading September crude oil rose 20 cents to $45.97/bbl and September RBOB gasoline was fractionally lower at $1.5321/gal.