The expiring September natural gas futures contract was set to open Wednesday about 2.0 cents higher at around $2.872/MMBtu as forecasts overnight continued to show cooling demand tapering off by the end of next week. The October contract was trading about 1.7 cents higher at around $2.862.

With Lower 48 production continuing to climb and the end of summer heat in sight, storage deficits haven’t been enough to prevent the front month from selling off over the last three sessions.

The overnight weather data came in slightly hotter based on a pattern emerging next week, although the European model was slightly cooler, according to NatGasWeather.

But models “still advertise summer heat quickly fizzling after Sept. 7 as upper high pressure that’s dominated for much of this summer finally weakens,” the firm said. It won’t be until after the next three Energy Information Administration (EIA) storage reports that “hefty deficits have the potential to be meaningfully reduced. As such, we expect once the Sept. 7 pattern arrives it will be very important record production prove it will print larger than normal builds this second shoulder season or estimates for end of season supplies will continue to be reduced.

“Clearly bears have regained momentum,” but NatGasWeather said analysts were “interested to see how the markets trade” after front month expiration Wednesday and the release of storage data Thursday “to see if bulls are willing to step in and buy the dip.”

Intercontinental Exchange (ICE) EIA Financial Weekly Index futures settled Tuesday at build of 65 Bcf for this week’s storage report. During the same week last year, 32 Bcf was injected into storage, while the five-year average stands at 59 Bcf.

ICE End of Storage Index futures settled at 3,365 Bcf. Inventories as of Aug. 17 stood at 2,435 Bcf, about 22% below last year and about 20% below the five-year average.

The selling over the past week or so reflects “increasing recognition that, despite historically low expected end-of-summer storage, the market is likely to be significantly oversupplied this winter and much of next year,” EBW Analytics Group CEO Andy Weissman said. “Despite a sharp expected decrease in power sector demand for natural gas after the first week in September, the September contract could rebound during its last few hours on the board. In recent months, the front month contract has almost always posted gains just before final settlement.”

The trend partly could be the result of the addition of 3.4 Bcf/d of liquefied natural gas exports, “nearly all of which is priced off of the final settlement price for the delivery month contract,” he said. “Even if natural gas prices rebound today, however, further declines are likely soon.”

Looking at the technicals, after recent declines the October contract could pause around a key retracement level at $2.849, an area where the 50, 100 and 200 day simple moving averages also converge, according to ICAP Technical Analysis analyst Brian LaRose.

Given that “the technicals [are] a little overextended I would not be surprised to see some sideways price action into mid-week,” LaRose said. “However, I would emphasize that such price action is not required, nor necessary.”

LaRose said he still pegs $2.814 “as the next step down if these moving averages do not slow the descent.”

October crude oil was set to open about 51 cents higher at around $69.04/bbl, while September RBOB gasoline was trading fractionally higher at around $2.0832/gal.