September natural gas prices were set to open less than a penny lower at $2.751 ahead of Thursday’s market open amid mixed weather trends and in anticipation of fresh storage data from the Energy Information Administration (EIA).

The Nymex September futures contract is coming off two consecutive days of losses, and the market appears unclear over the short-term direction of prices. Hot weather is expected to linger for much of August and persistent low storage inventories continue to be brushed aside by record production that’s expected to continue growing.

As for weather, overnight trends were more mixed than Tuesday, with slight gas-weighted degree day (GWDD) losses continuing in the medium range as confidence increased on a cool shot across the Ohio River Valley into the Southeast focused on Aug. 11, according to Bespoke Weather Services.

The forecaster, however, also noted “a tick up” in some long-range warmer risks, noting the medium-range cooling is due more to temporary upstream tropical forcing (that is noisy and difficult for models to work out) as opposed to a shift in the base atmospheric pattern toward a more Nino-like pattern.

“The result is that through the middle third of August, we could still see modest warmth before we would eventually expect a more Nino-like pattern by the end of the month to present more sustained cool changes,” Bespoke chief meteorologist Jacob Meisel said. Still, with cool risks lingering across the South/Southeast, it will be hard to get GWDDs as elevated, he said.

Meanwhile, the EIA is scheduled to release its weekly storage inventory report, for the week ending July 27, at 10:30 a.m. ET. Estimates are pointing to a build near the five-year average. Some 18 Bcf was injected into storage inventories for the similar week in 2017, and the five-year average stands at 42 Bcf.

Kyle Cooper of IAF Advisors is projecting a 40 Bcf build, while Genscape Inc. is projecting a 45 Bcf injection. A Bloomberg survey had a range between 25 Bcf and 58 Bcf, with the median response of survey participants coming in at 43 Bcf. Intercontinental Exchange settled at 43 Bcf.

Genscape’s forecast is a composite of its daily supply/demand model, which is showing a 48 Bcf injection, and its sample of Lower 48 storage facilities, which is showing 42 Bcf. On the week, the firm had production having averaged close to 80.2 Bcf/d, although that supply gain from the previous week was partly offset by Canadian imports falling about 0.3 Bcf/d week/week to 5.7 Bcf/d. Demand averaged an aggregate 79 Bcf/d, led by power averaging 37.3 Bcf/d.

“If our estimate of a 45 Bcf injection is realized, it would be loose relative to degree days and normal seasonality by about 0.6 Bcf/d,” Genscape senior natural gas analyst Rick Margolin said.

From a trader’s perspective, the inability to sustain a rally despite extremely hot weather forecasts sends a clear message: don’t take long positions, said EBW Analytics. In this context, this morning’s EIA Weekly Storage Report takes on critical importance.

“The consensus forecast is for a build of 42-45 Bcf. If today’s report comes in near this

level, the prospects for a further rally will be bleak,” EBW CEO Andy Weissman said.

The last two reported builds, however, have come in far below expectations. With hotter-

than-normal weather expected to continue for much of August, if another puny injection is

reported for a third straight week, a retest of resistance for the September contract at

$2.82-2.83/MMBtu is still possible.

The entire futures strip continues to lag this morning, however, indicating that any bounce off either a supportive EIA print or a strong cash market is likely to fail, “though we could see a move still towards resistance near $2.80 before the bounce fails,” Bespoke said.

Cash prices have been remarkably strong, so Meisel said his firm would not be surprised to see some strength this morning, especially with long-range forecasts still having modest heat and production sitting off highs. The weak strip, however, “indicates that downside could be swift with any additional GWDD losses, and pressure increases on prices as production returns into next week.” Bespoke sees $2.70-$2.72 increasingly in play the next couple days.

Crude oil futures were trading 48 cents lower at $67.18/bbl, and RBOB Gasoline futures were trading 1.67 cents lower at $2.0284/gal.