Drawing support from a toasty temperature outlook for the next two weeks, natural gas futures continued to advance in early trading Tuesday. The August Nymex contract was up 6.5 cents to $1.895/MMBtu at around 8:40 a.m. ET.

The overnight guidance continued to advertise a “quite hot” pattern for the next 15 days, one that would deliver “solidly” hotter-than-normal national cooling degree day (CDD) totals, according to NatGasWeather. 

The forecast remains particularly hot for July 16-22 “as upper high pressure dominates much of the U.S. with widespread heat and humidity that will push temperatures into the 90s and 100s and the heat index into the dangerous 100-120 degree range,” the forecaster said. “Yet again, the overnight European model remains hotter” than the Global Forecast System by over 10 CDD, but both models are “solidly bullish” and point to “increasing odds heat holds through the end of July.”

The recent futures gains have occurred near the front of the curve, while contracts further out have actually lost ground; the December 2020 through March 2021 contracts each shed over 3.0 cents in Monday’s trading.

Analysts at EBW Analytics Group attributed this dynamic to a recent 1.5 Bcf/d increase in production output this month. 

“Near term, this increase in production is being more than offset by extreme hot weather, allowing the August-October contracts to recover from severely depressed levels,” the EBW analysts said. “But once weather returns to long-term norms, the effect will be to loosen the supply/demand balance, taking some of the froth out of the back end of the curve.”

The EBW analysts said they expect an increase in cooling demand next week to push cash prices higher and potentially lead to a test of resistance for the August contract at $1.92 or potentially $1.98-2.02.

However, even if bulls are able to extend the recent rally, ICAP Technical Analysis analyst Brian LaRose sees “limited” upside potential for prices at present.

“Bulls should still proceed cautiously,” LaRose said. “Peg $1.872-1.883 as the immediate obstacle. In the event this band is unable to provide resistance the next step up becomes” a series of targets between $1.982 and 2.092. “As a reminder, this area of contention represents the upper end of this year’s trading range.”

August crude oil futures were off 30 cents to $40.33/bbl at around 8:40 a.m. ET, while August RBOB gasoline was up fractionally to $1.2452/gal.