Further declines in projected cooling demand in the latest forecasts pressured natural gas futures lower in early trading Tuesday, although analysts were predicting volatility heading into this week’s front month expiration. As of 8:45 a.m. ET, the August Nymex contract was down 8.2 cents to $4.020/MMBtu, while September was off 8.3 cents to $3.999.

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After a volatile session on Monday, natural gas futures managed to finish the day in positive territory even with “major” losses in projected cooling degree days (CDD) from midday weather model runs, according to analysts at EBW Analytics Group.

“With options expiring today and contract expiration tomorrow, near-term volatility is likely to remain high,” the EBW analysts said in a note to clients early Tuesday. “With the models continuing to shed CDD overnight, though, the price trajectory later this week could reveal a great deal regarding likely price trends in August.”

Maxar’s Weather Desk noted cooler changes in both the six- to 10-day and 11- to 15-day periods in its latest forecast Tuesday. 

For the six- to 10-day, covering Sunday through Aug. 5, the changes were focused on the eastern two thirds of the Lower 48.

“High pressure will be sent southward from Canada and into the Midwest and East, supplying and reinforcing below normal temperatures,” Maxar said. “The feature pushes farther south than in earlier outlooks, likewise sending a frontal boundary southward.”

Cooler adjustments in the latest projections for the 11- to 15-day window, from Aug. 6-10, were focused in the Midcontinent and South, according to the forecaster.

As a result of the large-scale pattern for the period “durable heat should lack in the eastern half, where the forecast is near normal with temperatures,” Maxar said. “Above normal readings favor the West, which has been the case for most of the summer in response to the ongoing drought.”

The EBW analysts said prices in the day-ahead market could slide next week, given that the hottest weather of the summer is expected to come to an end later this week. This would put downward pressure on futures prices, they said.

“While this remains a likely scenario, recent trading suggests that the market believes the entire forward curve is underpriced,” the EBW analysts said. “If this sentiment is powerful enough, it could limit the decline.”

From a technical standpoint, prices for the September contract would need to drop back below $3.869-3.794 to indicate trouble for bulls, according to ICAP Technical Analysis analyst Brian LaRose.

“So long as the bulls can prevent that from happening I am inclined to treat any sideways to lower price action as corrective and keep our sights set on higher levels,” LaRose said in a note to clients. “In terms of next steps, above $4.084 there is room to the $4.181 area. Above that, a rise to $4.386, even $4.818 would be in play.”

September Nymex crude oil futures were down 9 cents to $71.82/bbl at around 8:45 a.m. ET.