After spending much of June in negative territory, natural gas forward markets ended the month on a strong note, with August gaining an average 7.7 cents between June 23 and 29 as heat is expected to blanket much of the country in the coming weeks to drive up demand, according to NGI’s Forward Look.

The markets were strong from the start of the week, when forecasts showed temperatures for the first 10 days of July coming in 15% above normal, with the most intense heat covering the gas-intensive southeastern United States as 90-degree temperatures become more widespread across the region.

In fact, even the northeastern U.S. is expected to experience intense heat for the start of July as high pressure returns to the region, lifting temperatures to the upper 80s to mid-90s. But a blip in the overall theme of heat and humidity appeared to be causing the market some hesitation heading into the extended holiday weekend as Nymex futures were firmly in the red Friday morning.

On Friday, the Nymex August futures contract slipped seven-tenths of a penny to $3.035.

“The coming pattern the next several weeks is going to be very warm to hot overall, but it appears it’s not quite hot enough for the markets liking or prices wouldn’t keep drifting lower,” NatGasWeather forecasters said. “The markets could be a little disappointed in cooler trends for late next week across the Great Lakes and Northeast, although the data still favors a very warm to hot pattern before and after.”

Indeed, weather outlooks show a weather system with showers and comfortable temperatures will linger over the north-central U.S. through the July 8-9 weekend for regionally light demand. On the whole, however, national gas demand will continue to increase during that time, as high pressure strengthens over the East where major cities such as Washington D.C. and New York City will warm back into the upper 80s to lower 90s.

Most of the weather data still favors hot high pressure reclaiming ground across much of the country July 11-14, NatGasWeather said. But the forecasters cautioned there are some risks the data again trends cooler over the eastern U.S. if additional weather systems are able to sneak in, which needs close watching.

The weather team at Bespoke Weather Services said despite the cooler risks that could creep in for the second week of July, the heat in the East may still keep national cooling demand above average.

“Weather risk appears to have turned back just a bit more bullish, as long-range forecasts are now holding consistently more heat which could really help to balance the natural gas market overall,” Bespoke said.

In fact, all weather guidance seemed to trend a bit warmer past day 12, the forecaster said, with global guidance showing more sustained heat but Canadian ensemble guidance still showing some trough risk in the East. Climate guidance from the National Oceanic and Atmospheric Administration, however, showed a few weeks of cooler weather after mid-July, which would limit demand more noticeably, Bespoke said. Still, the New York-based forecaster said it sees more upside potential than downside.

NatGasWeather said Mexican exports and LNG exports should at least keep a floor under prices, which as of midday Friday had fallen more than 10 cents from Thursday’s high.

Data and analytics company Genscape Inc. said exports to Mexico reached summer-to-date highs in the last week with the conclusion of maintenance in northeastern Mexico and increased flows to western Mexico.

“Exports to Sonora surged June 23 as temperatures in Hermosillo approached 120°F, nearly 20° above normal. Flows are expected to continue rising with hotter weather expected and completion of intra-Mexican infrastructure,” Genscape said.

Mexico’s national weather agency’s – SEMARNAT – latest outlook for July predicts strong probability of above-normal temperatures in the northwestern states of Baja, Sinaloa and Sonora. “These markets are served by gas from the El Paso, North Baja, and Sierrita pipelines out of Arizona and Southern California,” Genscape said.

SEMARNAT shows moderate probability of above-normal temperatures in Chihuahua, western Nuevo Leon, Durango and Coahuila, markets served by pipeline exports out of the Waha and Agua Dulce/South Texas hubs.

Meanwhile, the markets could also get a little help from storage data during the next few weeks, which have thus far in the injection season illustrated underlying tight conditions. The U.S. Energy Information Administration reported a 46 Bcf injection for the week ending June 23, below market expectations in the low to mid-50 Bcf range. Last year, 41 Bcf was injected and the five-year average stands at 72 Bcf.

“This data point provides further confirmation that the natural gas markets are at least 2 Bcf/d undersupplied. Over the last nine weeks, this state of undersupply has caused the surplus to fall by 120 Bcf from 307 Bcf at the end of April,” Wells Fargo Bank analysts said following Thursday’s storage report.

Inventories now stand at 2,816 Bcf and are 319 Bcf less than last year and 181 Bcf greater than the five-year average.

Based on current weather forecasts, Wells Fargo said its model indicates a 102 Bcf cumulative injection over the next two weeks, which would bring the storage surplus versus the five-year average down to just 147 Bcf. Wells Fargo’s end-of-injection season estimate is 3.88 Tcf, which is in line with the five-year average and incorporates 3 Bcf/d of lost power generation demand due to gas-to-coal switching driven by higher summer gas prices.

Taking a closer look at the markets, the markets were fairly uniform in that gains were seen through 2018. Some markets, however, put up stronger increases, while others posted more muted gains. Beyond 2018, some weakness was seen in pricing, although losses were limited to just a few cents.

Nymex futures set the tone for the week as August futures rose 9 cents from June 23 to 29 to settle Thursday at $3.04. September and balance of summer (September-October) futures were up 9 cents each as well, settling at $3.04 and $3.05, respectively. The winter 2017-2018 futures strip was up 6 cents to $3.28.

Nationally, August forward prices climbed about 8 cents on average, September prices rose an average 9 cents as did the balance of summer. The winter 2017-2018 strip was up an average 6 cents, according to Forward Look.

Some markets in the Pacific Northwest, however, put up more muted increases as that is the only region that is forecast to not see above-average temperatures for July. And while early indications show temperatures rising for August, it appears traders in that region need a little more convincing.

Northwest Pipeline-Sumas August forward prices stayed flat from June 23 to 29 at $2.389, while September rose just 5 cents to $2.38, the balance of summer (September-October) moved up 5 cents to $2.39 and the winter 2017-2018 climbed 6 cents to $2.98, Forward Look data shows.

Meanwhile, California forward prices also posted softer increases as strong renewable output has tempered the impacts of heat that has been common in the state thus far this summer.

Across the country in New England, prices at Algonquin Gas Transmission City-gates rose substantially for the summer and winter strips. While AGT-CG August forward prices climbed just 7.2 cents from June 23-29 to reach $2.653 (slightly below the national average), September prices edged up 11 cents to $2.589 and the balance of summer (September-October) jumped 13 cents to $2.61. The prompt winter, meanwhile, sat Thursday at $6.65, up 11 cents from June 23.

Stronger gains seen beyond the summer months at Algonquin are due to the easing of restrictions along the pipeline as a scheduled summerlong maintenance is expected to wrap at the end of October.