A cooler look from forecasts over the weekend helped send natural gas futures prices into retreat in early trading Monday. The September Nymex contract was off 3.8 cents to $2.200/MMBtu at around 8:45 a.m. ET. 

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Since Friday, the major weather models have trended cooler, with both the American and European datasets dropping several gas-weighted degree days from their projections for next week, Bespoke Weather Services said early Monday.

Models shifted “the focus of heat more into the West, allowing for variability in the eastern half of the nation,” Bespoke said. “Our official forecast was positioned cooler than the models given the bias for models to run too hot even in a hotter-than-normal pattern, so our numbers are not vastly different from Friday. 

“We still see a notable drop in global angular momentum coming up, indicating a reinvigoration of the La Nina base state. This keeps the pattern biased hotter than normal even with the weekend change…We suspect the final week of the month maintains the hotter-than-normal lean.”

Natural gas futures prices surged higher last week, with the front month gaining more than more than 40 cents in a matter of days. This rally was “thoroughly justified,” according to analysts at EBW Analytics Group.

Recovering liquefied natural gas (LNG) export demand and continued depressed production levels should see the market “tighten dramatically” over the next few months, potentially leading to “significant storage deficits” next year, they said.

“By this winter, prices are likely to be much higher — and to continue increasing in 2021,” the EBW analysts said. “The near-term price trajectory, however, is more difficult to predict. Over the next few weeks, cash market demand is likely to weaken considerably, putting significant downward pressure on natural gas prices at Henry Hub as storage continues to build. In this context, support is likely to be frequently tested.

“But upward momentum has become strong. Even small upticks in LNG feed gas flows or production declines could trigger steep gains. While we do not expect the front month to fall much below $2.00, we urge caution, since volatility is likely to be high.”

From a technical standpoint, the September contract has been “stuck like glue to the highs,” according to ICAP Technical Analysis analyst Brian LaRose. However, bulls will need to break through a band of resistance between $2.252 and $2.342 in order to “open the door for higher prices,” the analyst said.

Should bulls break through this level, they would next be looking at resistance targets at $2.401-2.427-2.459-2.472, LaRose said. “See the risk for more sideways to lower price action if they do not. Still inclined to treat any near-term weakness as corrective as long as natural gas remains above $1.970-1.945.”

September crude oil futures were up 50 cents to $41.72/bbl at around 8:45 a.m. ET, while September RBOB gasoline was up about 1.3 cents to $1.2205/gal.