August natural gas futures were set to open Friday about 1.7 cents lower at around $2.923/MMBtu, with forecasters continuing to expect heat to ease in the East by the second week of July as surging production keeps a lid on prices.

Overnight weather models “began shifting some of the cooler trends into the medium-range, making it clear that intense heat across the country is only likely to last through July 6 with far less heat in the East by July 7,” according to Bespoke Weather Services. “As the ridge retrogrades westward we would look both for tropical activity from July 7-10 in the Gulf of Mexico as well as cooler than average weather across the South, with the potential for temperatures in the East to be just around average.”

Bespoke said it expects gas-weighted degree days in its long-range outlook to continue declining into the weekend.

“With power burns now not quite as tight and production still near record highs, it has become clear that we need risk of sustained record or near record heat to keep prices above $3,” the firm said.

Genscape Inc. said revisions to pipeline nomination data have pushed affiliate Spring Rock’s daily Lower 48 production estimate above the 80 Bcf/d mark for Thursday, reaching 80.05 Bcf/d, with Friday expected to roughly equal that total.

Meanwhile, Thursday’s Energy Information Administration (EIA) storage report came with a bearish surprise revision to the prior week’s injection figure, even as the build for the latest report week ending June 22 came in around 5 Bcf below market expectations at 66 Bcf.

The revision increased the implied build for the week ending June 15 from 91 Bcf to 95 Bcf.

“This higher build suggests a somewhat looser stat for that week, moving from plus 1.1 Bcf/d looseness versus degree days and normal seasonality to plus 1.6 Bcf/d,” Genscape analyst Rick Margolin told clients.

As for the most recent storage report week, analysts with Tudor, Pickering, Holt & Co. (TPH) calculated that the market was about 0.5 Bcf/d undersupplied even with U.S. production “closing in on 81 Bcf/d, up 800 MMcf/d week/week.

“The production ramp is more attributable to the reversal of processing downtime rather than new supply as Northeast volumes marginally increased,” the TPH team said. Liquefied natural gas “exports have appeared to stabilize at around 3.5 Bcf/d, but Mexican export weakness continues with exports down year/year.”

EBW Analytics Group CEO Andy Weissman noted that following EIA’s report Thursday the front-month dropped from an intraday high of $3.021 to settle at $2.940, “with technicals setting up for potential further declines to test resistance at $2.88-2.91 during today’s session. A slight easing of expected heat over the next two weeks,” including a drop of 1.7 cooling degree days, “may also weaken support.

“The big news for today will be the EIA production report for April,” he said. “If monthly gains come in above expectations, it will be another sign that gas output is growing rapidly -- and could lead to renewed downward pressure” on futures.

August crude oil futures were set to open about 4 cents higher at around $73.49/bbl, while July RBOB gasoline was trading about 1.5 cents higher at around $2.1474/gal.