Natural gas futures were trading lower early Tuesday as the overnight guidance eased back on the expected heat over the next two weeks. The August Nymex futures contract was trading 2.2 cents lower at $2.381/MMBtu shortly after 8:30 a.m. ET.

Except for the European model, all overnight weather data trended cooler, dropping a few cooling degree days (CDD) from the forecast, according to NatGasWeather.

“Where most of the demand was lost was due to a weather system over the Southeast tracking along the Gulf Coast this weekend and attempting to strengthen into a tropical system prior to tracking inland over Texas early next week with heavy showers,” the forecaster said. “However, the European model was hotter July 16-23” to keep its 15-day outlook mostly unchanged in terms of total CDDs.

It was not surprising that CDD totals eased off overnight given the extent of widespread heat already in the forecast, according to NatGasWeather. “But with production setting fresh records, the supply versus demand balance remains out of whack, where even much above normal CDDs will still only result in slightly smaller than normal builds.”

Radiant Solutions similarly noted a “small cool change” in its latest six- to 10-day forecast, but with the period continuing to show widespread above normal temperatures.

“This comes in response to remnant moisture associated with an earlier tropical system coming out of the Gulf of Mexico,” the forecaster said. “The details around this potential tropical system remain a point of uncertainty in the Eastern Half, where models differ in their temperature projections.”

The 11-15 day period should carry over “the broadly warmer than normal themes” from the six- to 10-day, Radiant said, adding that “changes from the previous outlook lean additionally warmer in the details. Widespread above normal coverage has agreement among this morning’s models.” The forecaster cautioned that “unsettledness remains a concern for areas from the Midwest toward the East, along the periphery of a ridge.”

Gulf Coast residents should be on the lookout for possible tropical storm activity this week, as conditions point to an 80% chance of cyclone formation over the Gulf of Mexico in the next five days, according to the National Hurricane Center (NHC).

“A broad low pressure system located over the eastern Florida Panhandle is producing disorganized shower activity,” the NHC said in a note issued at 8 a.m. ET Tuesday. “The low is forecast to move southward to southwestward and emerge over the northeastern Gulf of Mexico later today.

“Once the system is over water, environmental conditions are expected to be conducive for tropical cyclone formation, and a tropical depression is likely to develop by late Wednesday or Thursday while the system moves westward across the northern Gulf of Mexico.”

Meanwhile, it’s possible that last week’s rally forced some market players to “cover some weak short positions,” according to analysts with Drillinginfo.

“The fundamental indicators have changed with the forecasts but remain slightly bearish over the summer period,” analysts said. “Any rally in the coming weeks will have to work through the selling that will occur between $2.444 and $2.522, where the market broke down in late May. With the change in the fundamental forecasts, declines down to $2.30-2.263 will find buyers.

“The market remains range-bound, with a slightly negative bias. A break above $2.522 on a daily close will bring the bias to a neutral stature.”

Just after 8:30 a.m. ET, August crude oil futures were trading 24 cents higher at $57.90/bbl, while August RBOB gasoline was up around 1.8 cents to $1.9190/gal.