Much of the shortened holiday week was characterized by only modest shifts in natural gas forwards markets, but the action coming back from the extended holiday weekend was enough to send prices down an average of 23.5 cents between July 1 and July 6, according to NGI’s Forward Look.

The Nymex August contract was down 20.8 cents during that time, settling July 6 at $2.777.

The rest of the calendar year posted similarly hefty declines, with the Nymex September contract shedding 21.7 cents from July 1 to 6 and the balance of summer (September-October) dropping 21.4 cents. The winter 2016-2017 strip was down 15 cents, while the following winter was down just 2 cents.

Nationally, prices posted similar losses. September fell an average of 23.7 cents; the balance of summer slid an average of 23.2 cents, and the winter 2016-2017 shed an average of 16 cents. The winter 2017-2018 package eased by an average of 2 cents, according to Forward Look.

“There’s no fundamental reason for it to have sold off as much as it did. I think the recent rally was justified,” said Genscape’s Eric Fell, senior natural gas analyst.

Genscape, based in Louisville, KY, is a real-time data and intelligence provider for energy and commodity markets.

After plunging 22.3 cents on July 5, the August contract shifted no more than a couple of cents for the remainder of the week as traders appeared content with market positions, even after Thursday’s storage report from the U.S. Energy Information Administration (EIA).

The EIA reported a 39 Bcf build to storage stocks for the week ending July 1, a slight bullish miss compared to market estimates in the low-40 Bcf area.

Furthermore, the injection was less than half the injection reported for the same time period last year.

“After opening the day higher ($2.839 pre-market), prices drifted back to almost flat before the EIA storage report,” said analysts at Mobius Risk Group.

“The injection of +39 Bcf led to a reaction high of $2.841, but shortly afterward the market collapsed. Over the next hour and a half, the prompt contract fell to $2.725. Neither the late-morning low nor reactionary high was sustainable,” Mobius said.

The lack of significant swings in the futures market continued Friday morning, where prices at mid-day were trading essentially flat to Thursday’s settle.

“I think the market is getting comfortable with the new price range. It went up quite a lot in a short amount of time,” Fell said.

But the coming week could bring about some renewed volatility as weather forecasts remain fairly bullish for the bulk of July.

The overall pattern for mid- and late July is expected to continue, with the hot upper ridge dominating large portions of the country, keeping temperatures above average, according to forecasters at NatGasWeather.

Although weather systems are expected to occasionally ride around the northern periphery, weakening the hot upper ridge, the overall theme is hot and humid, the forecaster said.

“Therefore, the recent sell-off could simply be technical, likely aided by increased production on the fundamental side,” NatGasWeather said. “It seems what happens here with prices will be quite important to see which factors the markets think are most important.”

Forecasters at Bespoke Weather Services agreed that the week’s downturn was likely a technical correction but said there could be even more downside risk despite the bullish weather outlook.

“August natural gas prices closed down a few ticks following a slight bullish miss in EIA data that still sent prices sliding. This bearish price reaction to slightly bullish data has appeared to open up more technical downside for the prompt-month contract, despite even more bullish weather risk getting added on in the long term,” Bespoke said.

The forecaster said a test of $2.68 support is likely in the next week or so.

And while weather could throw a wrench in that price movement, the market could go spiraling when EIA releases its next storage report, which early indications hint might show an injection of 60 Bcf or more.

“Any weekly storage report of greater than 40 Bcf between now and the end of August should reignite concerns over late-fall inventory levels,” Mobius said.

As of July 1, stocks were 538 Bcf higher than one year ago and 599 Bcf above the five-year average of 2,580 Bcf. At 3,179 Bcf, total working gas is above the five-year historical range, EIA said.

Analysts at global investment bank Jefferies said injections over the next two weeks are likely to total just about 100 Bcf versus 165 Bcf for the same period, further shaving the surplus current inventories hold over both year-ago levels and the five-year average.

Whether that’s enough to keep prices from tumbling remains to be seen, but the drivers behind the light expected refills are expected to continue.

Power burn is up 1.5-2 Bcf/d year over year, while supply is down about 2 Bcf/d from year-ago levels. Increased exports in the forms of liquefied natural gas and exports to Mexico are also driving lower refills, Jefferies said.

Indeed, NGI’s Nate Harrison, markets analyst, said exports to Mexico are likely having a much bigger impact on storage injections than most people consider.

As of April, more than 4% of marketed gas was being exported to Mexico, according to EIA and NGI calculations.

“It’s quite possible that by now (in July) more than 5% of U.S. marketed gas (well gas and associated gas) is going across the border,” Harrison said. “That, plus increasing power burn, is shaping up, in my mind, to a much more bullish price picture for 2017.”

Genscape estimated that about 3.59 Bcf/d was moving into Mexico on July 8.

“Volumes this week dipped to 3.35 Bcf/d, but have been as high as 3.74 Bcf/d in the past 30 days,” according to Genscape’s Rick Margolin, senior natural gas analyst. Margolin added that exports to Mexico indeed crossed the 5% threshold in both June and July.

Taking a closer look at individual gas markets, there were a couple of standouts.

On the East Coast, New York prices fell considerably less than the national average for the prompt month, and while losses further out the curve were more in line with other markets, they still came in below the national average, Forward Look data shows.

Transco zone 6-NY August fell just 7.5 cents between July 1 and 6, compared to the national average of 23.5 cents. September slid 13.7 cents, while the balance of summer (September-October) dropped 15.5 cents.

The relative strength in New York can be partly attributed to maintenance that began July 7 on Transco’s Leidy Line, which will shut in roughly 200 MMcf/d of production. Transco started work on the 24-inch Leidy Line A at the bottom of the diamond in Luzerne County, PA, according to Genscape.

Capacity through Leidy Line Aggregate Receipt MP 101 meter has been capped at 925 MMcf/d, down from its normal 1,395 MMcf/d, the company said. During the previous 14 days, flows through MP 101 averaged 1,146 MMcf/d.

The bulk of the reductions appear to be taking place via shut-in production hitting the Puddlefield M3631 meter, where receipts have dropped from 630 MMcf/d down to 480 MMcf/d in evening nominations, Genscape said.

The Chapin M3642 gathering and Carverton intrastate interconnect meters are also affected. The work is part of a two-phase effort to replace line segments. Phase 1 will run through July 13. The second outage will run July 25-31.

The outages come as temperatures in the Northeast are some of the hottest of the summer season so far. And while some weather systems will provide the region with a break, conditions overall will remain hot.

Meanwhile, over on the West Coast, Pacific Gas & Electric citygates saw losses that were roughly double that of the national average.

PG&E citygates August prices plunged 43.5 cents between July 1 and 6, September tumbled 39.4 cents and the balance of summer dropped 37.6 cents, according to Forward Look.

Even the prompt winter was down 24 cents, well above the 16-cent national average.

The sharp slide comes despite ongoing heat in some parts of northern California, where temperatures in the 90s are forecast to be the norm over the next couple of weeks in Sacramento, according to AccuWeather.

Highs in the 70s are expected in other areas of northern California, such as San Francisco, forecasts show.

Meanwhile, PG&E is set to begin a 13-day maintenance period July 11 at the Kettleman station, which will limit the Baja Path to a maximum of 600 MMcf/d of flows, 53% of its design capacity. Based on flows since June 1, this work appears unlikely to have a significant flow impact, partly due to reduced Baja Path flows this year compared to 2014-2015, according to Genscape.

This year’s Baja Path flows in June and July have been lower by an average of 175 MMcf/d than in June and July of the previous two years, the company said. The daily flow in 2016 has been 445 MMcf/d relative to 620 MMcf/d in 2014-2015.

“Since June 1 of this year, Baja Path flows have only exceeded 600 MMcf/d twice, at 624 and 612 MMcf/d, so limiting flows to 600 MMcf/d seems unlikely to have a significant impact barring any additional system restrictions,” said Genscape’s Joe Bernardi, natural gas analyst.

These year-over-year differences can be traced to both reduced demand on the PG&E system, as well as fewer molecules flowing on the Baja Path per unit of system-wide demand, Bernardi said.

This year in June and July, PG&E system-wide demand has averaged 1.793 Bcf/d, relative to 1.939 Bcf/d and 2.064 Bcf/d in 2014 and 2015, respectively.

At the same amount of system-wide demand, Baja Path flows are less than their counterparts in 2014 and 2015. For example, at 2.0 Bcf/d, the 2014 Baja Path would flow 691 MMcf/d, the 2015 Baja Path would flow 572 MMcf/d, and the 2016 Baja Path would flow 437 MMcf/d, he said.

PG&E could see some upside risk during the outage if hot weather becomes more widespread in the state.