July natural gas is expected to open 4 cents higher Tuesday morning at $2.77 as traders discount a further moderation in the temperature outlook and look to purchase longer-term strips. Overnight oil markets were mixed.

Near-term market drivers are dominated by a moderating weather outlook. “This market sold off mainly in response to weekend updates to the short-term temperature views favoring mild trends across a broad portion of the nation’s Midcontinent into the 4th of July holiday weekend,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients.

“These weather views are tending to overshadow slowed production growth for the time being as well as some potential gas-to-coal displacement that could emanate off of lowest prices in two weeks. We look for support at the $2.71 level [Tuesday] as we continue to advise a neutral stance with the trade still positioned at about midway between our $2.50 and $3 expected price parameters.”

Forecast cooling degree days ratcheted lower in overnight model runs. “The latest six-10 day forecast is cooler than the previous forecast across a good portion of the East and is not as hot over the West,” said WSI Corp. in its Tuesday morning report. “The north-central U.S. and Plains are warmer. Period PWCDDs are down another 3.5 to 44.9 for the CONUS. Forecast confidence is average as medium-range models are in good agreement and have been fairly consistent with the large-scale pattern. There is localized uncertainty with the timing of cold front(s) and unsettled weather over the eastern half of the nation. The amplified pattern supports a risk to the cooler side over the eastern two-thirds of the nation and the Southwest.”

Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile said to look for the market to test Monday’s value area at $2.739-2.725 and then test $2.835-2.775. “Maybe” the market will go on to test $2.696-2.670. Saal said that a number of multiple untested value areas “infer market indecision, yet plenty of price volatility.”

Consensus views see the natural gas confined to a trading range, but technical indicators show interest in forward pricing. Saal said that forward strips are “overbought” in a Tuesday morning note to clients.

In overnight Globex trading August crude oil slipped 16 cents to $60.22/bbl and August RBOB gasoline rose fractionally to $1.9964/gal.