August natural gas futures were set to open Monday about 0.7 cents lower at around $2.851/MMBtu as forecasters continue to watch for longer-term cooling despite some impressive heat over the next two weeks.

Bespoke Weather Services said its gas-weighted degree day (GWDD) forecast increased over the weekend as a result of guidance showing heat intensifying over the East in the medium-term.

“However, we continue to see increasing cooling risks later in Week 2 and into Week 3 that should intensify on model guidance through the week...the result, then, is a trade-off between minor raw GWDD additions to the forecast versus what is increasing confidence the pattern should break into the end of July and deliver more sustained cooldowns (unlike briefer ones like we have seen the last couple of days),” Bespoke said.

With heat strong enough over the next two weeks to “limit injection sizes and temporarily cancel out production growth,” the firm said a potential bounce for prices up to the $2.90 area is in play “before long-range cool risks become more apparent. Once those long-range cool risks arrive in force on guidance (and assuming production remains as elevated) we would look for even further downside for prices, with $2.75 likely being tested either later this week or early next week,” though with $2.80-2.82 support likely to hold in the near-term.

NatGasWeather said Sunday the weekend data showed periods of cooler temperatures in the Midwest and Northeast July 17-21.

“The pattern is still an overall hotter than normal one with most of the southern two-thirds of the U.S. seeing highs of upper 80s to 100s for strong demand,” the firm said. “At issue is the heat dome will only occasionally pulse into the northern U.S., providing swings in temperatures between very warm to hot and mostly comfortable...It’s still a modestly bullish pattern” showing consistently higher than normal cooling degree days, but it would be “more impressive if production wasn’t continuously setting new records to effectively counter.”

This week’s Energy Information Administration (EIA) storage report is on track to fall below the five-year average, NatGasWeather said.

“However, the reports three and four weeks out have five-year averages of 46 Bcf and 43 Bcf, a very difficult threshold for builds to beat on the low side without impressive heat,” the firm said. “To our view, this shows production has simply become too strong, foretelling the start of a steady easing of deficits back towards normal in the weeks and months ahead.”

In terms of technicals, natural gas bulls have more work to do despite keeping prices above critical support last week, according to ICAP Technical Analysis analyst Brian LaRose.

“For the moment natural gas has managed to hold above critical support at $2.809-2.795-2.792-2.774,” LaRose said. “But the bulls will need to do more than just hold support. To have a shot at another round of fresh highs they must launch a rally from this neighborhood. Fail to do so and a deeper seasonal retreat should be anticipated. Our next major downside target in this case, $2.610-2.600.”

August crude oil was set to open about 23 cents higher at around $74.03/bbl, while August RBOB gasoline was trading 1.9 cents higher at around $2.1275/gal.