August natural gas futures were set to open Tuesday slightly lower at around $2.826/MMBtu as production continues to temper any bullishness from recent and forecast heat.

The recent prompt month declines coincide with decreases to projected demand for Weeks 2 and 3 of the current outlook, according to EBW Analytics Group CEO Andy Weissman.

“From a technical standpoint, support for the August contract near $2.80 may not be easy to break -- especially since indications that a pattern change will occur in late July or early August, while increasing, are not yet definitive,” Weissman said. “This morning’s forecast, however, loses another” 2.7 cooling degree days (CDD) “in Week 2, bringing the total loss since last Friday to 5.9 CDDs.

“With continued rapid increases in natural gas production driving bullish sentiment out of the market, support at $2.80 could fail, with the August contract potentially posting another loss,” he said. “Further declines are likely before the end of the week, with a potential to test support at $2.77 later this month.”

In terms of the latest forecasts, NatGasWeather said overnight data came in cooler for the East late next week and into the following weekend but was little changed otherwise.

“Most important, the data failed to trend notably hotter over the important eastern U.S. for the second half of July,” the firm said. “...What will be needed for patterns to again become solidly bullish is for the core of the hot upper ridge to shift back over the east-central after next week, although the data has yet to suggest when this might occur.”

While the current pattern remains “hot over most the country, the markets are clearly stating they want more impressive heat over the important Great Lakes and Northeast.”

Looking at the technicals, ICAP Technical Analysis analyst Brian LaRose said he’s pegging $2.809-2.795-2.792-2.774 as support.

“The potential for another round of fresh highs seems doubtful at this point,” LaRose said. “In the event natural gas does bounce from this neighborhood, I would now be inclined to treat any pop as corrective in nature. Should this band prove to be less than contentious look for natural gas to make its way down to $2.610-2.600 next.”

Meanwhile, estimates show the market anticipating a lighter than average build from this week’s Energy Information Administration (EIA) storage report. The Desk’s Early View storage survey showed respondents on average expecting EIA to report a 52.8 Bcf build for the week ended July 6, with responses ranging from 25 Bcf to 68 Bcf.

Intercontinental Exchange EIA Financial Weekly Index futures for the upcoming report settled at 51 Bcf Monday. Last year, EIA recorded a 59 Bcf build, and the five-year average is a 77 Bcf injection.

August crude oil was set to open about 34 cents higher at around $74.19/bbl, while August RBOB gasoline was trading about 1.8 cents higher at around $2.1662/gal.