August natural gas is expected to open 8 cents lower Monday morning at $3.87 as traders factor in forecasts of still more cooling with risks to the forecast cooler still. Overnight petroleum markets rose.

Overnight weather forecasts moderated. WSI Corp. in its Monday morning outlook said, “[Monday’s] six-10 day forecast has trended cooler over the Midwest and parts of the Deep South while running warmer over California and the Great Basin. Confidence in today’s forecast is near to above average with models exhibiting good large-scale agreement and consistency. An amplified, stable pattern dominates this period.

“Deep, persistent troughing promotes a cooler risk through the east-central states, more specifically through the heart of the Midwest. A slight warmer risk remains in play over the interior West. A warmer risk is noted on individual days along the East Coast where a southerly flow is likely to evolve ahead of cold fronts dropping into the Midwest states.”

In the eyes of Tim Evans of Citi Futures Perspective, Thursday’s 107 Bcf storage figure “stunned’ the market and it remained stunned on Friday, “with no particular sense that the lower price level represented even a short-term buying opportunity.”

For the week ended Aug. 1, Evans calculates that the year-on-five-year deficit will contract to 580 Bcf from its present 727 Bcf shortfall. This week’s storage build report he places at 104 Bcf, well above last year’s 43 Bcf and a five-year build of 47 Bcf.

“This trend shows the market is becoming better supplied on a seasonally adjusted basis, and typically results in downward pressure on prices. Although the declining storage deficit suggests a matching further decline in price, we also want to bear in mind that the market will eventually reach a level that represents a bargain valuation, given that storage may still finish the storage injection season at perhaps 3,500 Bcf, which would put it about 330 Bcf (8.6%) lower than a year ago and 350 Bcf (9.1%) below the five-year average, still relatively lean levels depending on the severity of the winter to follow.”

Evans recommends standing aside the market for now pending the identification of a low-risk trade entry.

In a weekly letter to clients, Walter Zimmermann of United ICAP said he sees the market poised to head still lower. “From April 2012 to February 2014 the price action in natgas was driven by short-covering, [but] since Feb 2014 the driver of the price action has been long liquidation. With 47% bulls the most recent sentiment number, natgas is nowhere near a bearish extreme [and] the Elliott Wave question is whether there is any case for support before the 3.660 to 3.480 range.”

He added that his “nearest case for support is now the $3.850 area [where] the bulls will need a decisive break out above the $4.100 level to have any case for bottoming action.”

In overnight Globex trading August crude oil rose 30 cents to $103.43/bbl and August RBOB gasoline gained a penny and a half to $2.8757/gal.