Natural gas futures eased lower early Monday as guidance over the weekend dialed back the strength of widespread hotter than normal temperatures in the forecast. The August Nymex contract was down 2.6 cents to $1.779/MMBtu at around 8:40 a.m. ET.

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The temperature outlook for the next two to three weeks remains hotter than normal, but forecasts over the weekend reduced the intensity of upcoming heat, particularly for this week, according to Bespoke Weather Services. 

“This continues the theme we have seen recently where, despite a hotter pattern verifying, models have been shooting too high on temperatures in the medium range,” Bespoke said. “Offsetting this somewhat is the fact that we are locked into an above normal regime, so new days rolling into the back of the forecast are hotter than normal, keeping us on pace to edge out” July 2011’s record high gas-weighted degree day total.

However, the forecaster said it sees “risk that modeling could be too hot next week as well given this recent medium range bias in play.”

Analysts at EBW Analytics Group said cash market demand at Henry Hub could heavily influence natural gas futures prices this week.

“Early this week, temperatures in Houston and Dallas are expected to reach 100 degrees. This should help support prices in the day-ahead market at Henry Hub and limit the downside price risk” from losses in expected cooling demand over the weekend, the EBW analysts said.

“As the week progresses, scorching hot weather is expected to blanket much of the U.S., and temperatures in Texas should remain extremely hot. Absent a change in the 15-day forecast” or a notable drop in liquefied natural gas feed gas volumes, “the August natural gas contract is likely to strengthen significantly, potentially challenging resistance” around the $1.90 mark.

From a technical perspective, late last week bulls managed to prevent natural gas from dropping below key thresholds at $1.761 and $1.759, according to ICAP Technical Analysis analyst Brian LaRose.

“The question to start the week, can they slingshot natural gas above the recent $1.924 high?” LaRose said in a note to clients. “If they can we will be taking aim” at a series of resistance targets from $1.982 up to $2.092. “If they can not the door will be open for the drift lower to continue for now.”

August crude oil futures were off 49 cents to $40.06/bbl at around 8:40 a.m. ET, while August RBOB gasoline was down about 2.5 cents to $1.2584/gal.