August natural gas futures were set to open Friday about 1.5 cents higher at around $2.852, with the market turning its attention to a late-arriving Energy Information Administration (EIA) storage report after Thursday’s sell-off.

Despite the heat in the forecast, production growth and expectations for milder weather later in the month drove futures lower Thursday, setting the stage for a possible strong move in response to the 10:30 a.m. ET release of weekly government storage data Friday, according to EBW Analytics Group CEO Andy Weissman.

“The consensus for this morning’s storage report is for an injection of 76-77 Bcf, but it could be significantly below this level. With a much lower injection expected next week, the market could react strongly” if EIA’s injection figure surprises versus expectations, Weissman said.

“The key issue, however, remains whether a pattern shift occurs” in the Week 4 outlook period, he told clients Friday. “As of this morning, this still seems likely, bringing milder temperatures to the Northeast and Midwest. If this forecast validates, prices are likely to continue trending lower — although possibly not until after next week’s storage report.”

Estimates for this week’s storage report, issued Friday because of the Independence Day holiday, point to a build somewhat higher than the five-year average.

A Reuters survey of 21 traders and analysts showed respondents on average expecting EIA to report a 75 Bcf build for the week ending June 29. Survey responses ranged from 63 Bcf to 81 Bcf. Last year, EIA recorded a 60 Bcf build, and the five-year average is a 70 Bcf injection.

IAF Advisors analyst Kyle Cooper predicted a build of 78 Bcf, while Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at a build of 77 Bcf.

Turning to weather, the overnight guidance was “a touch hotter” for the Global Forecast System (GFS), “while the European model a touch less impressive with heat during the middle of next week, although a touch hotter before and after, offsetting,” NatGasWeather said. “Of importance, they both continue to show at least modest bouts of cooling over the northeastern U.S. during the third week of July and where the pattern could be hotter.

“…The natural gas markets seem to be weighing record production more heavily than hefty deficits and hot temperatures with prices down sharply since last Thursday,” the firm said. “It seems a bullish EIA storage miss and/or hotter second half of July trends are going to be needed to get prices to rally back above $2.90.”

According to the technicals, ICAP Technical Analysis analyst Brian LaRose said, “As $2.809-2.795-2.792-2.774 represents the lowest levels consistent with any corrective retreat off the $3.053/3.043 highs it is bottom or else. Carve out an immediate bottom and another round of fresh highs will need to be entertained. Should the bulls fail to quickly find their footing we would be prepared for a deeper seasonal retreat. Our next major downside target in this case, $2.610-2.600.”

August crude oil was set to open about 56 cents lower at around $72.38/bbl, while August RBOB gasoline was trading about 2.5 cents lower at around $2.1039/gal.