After a gap up in natural gas prices Sunday evening, natural gas bulls quickly found themselves in trouble as prices sold off through the day on Monday following signs production had returned to record highs. Selling continued into Tuesday, though long-range heat helped prices bounce Wednesday before bearish EIA data yesterday pulled prices back from resistance and pushed them lower today. 

Overall, this price action fit nicely with our expectations set in our Weekly Natural Gas Report on Monday. In the report we laid out why we expected models to trend hotter in early July and how that would push prices back up into resistance, with the eventual break of $3 turning into a shorting opportunity thanks in part to the loose balances demonstrated in a larger storage injection than expected last week. 

Those hot model trends certainly came to fruition, with our Morning Update showing that GWDDs could approach record levels (since 1981) to close out June or bring in July. 

Such early July heat has been remarkably well-demonstrated by a number of atmospheric indicators we follow for long-range pattern trends. In fact, even last Friday (June 15th) we had warned clients to expect long-range forecasts to heat up over the weekend and into the following week. 

Now, we head into the weekend with the Climate Prediction Center showing very significant odds for heat in the long-range. 

Even with this heat, however, the natural gas market was unable to rally to close out the week, with solid losses all along the strip. 

This appeared more balance-driven, as we explained to clients in our intraday Note of the Day. This Note of the Day included our new Daily Natural Gas Balance View, looking at trends in production, LNG exports, and weather-adjusted power burns/demand to cover all aspects of natural gas balance. The natural gas strip seemed to confirm our reading of balance in our Note today, with N/V only widening 2 ticks on a day where the prompt month July contract fell over a percent.