The expiring June natural gas contract is expected to open 5 cents higher Wednesday morning at $2.87 as traders anticipate a short-covering rally and suggest moderating weather not sufficient enough to instigate a test of recent market lows. Overnight oil markets were mixed.

Weather forecasts are calling for a slight moderation. WSI Corp. said, "[Wednesday's] six-10 day period forecast is warmer than the previous forecast across the Plains, Midwest into the Northeast due to model trends and the day shift. The Southeast and interior West are cooler. Period PWCDDs are down 0.5 to 33.1. Forecast confidence is average and has increased since yesterday as medium-range models are in good agreement with the large-scale pattern."

WSI sees "a slight upside risk across the central and northern U.S. The Southeast and Southwest have risks to the cooler side."

Tim Evans of Citi Futures Perspective doesn't see moderating weather as a market driver strong enough to initiate a bearish trend, and said that forecasts may not be "supportive enough to prevent a short-term price drop, [yet] we don't see the latest weather forecasts as bearish. Given the background tightening of the supply-demand balance implied by recent storage reports, we see near-average storage injections over the next few weeks."

Evans forecasts a build of 87 Bcf for the week ended May 22, and by the 12th of June the year-on-five-year deficit has narrowed from its current 35 Bcf to 10 Bcf. "The decline does confirm that the market is becoming marginally better supplied on a seasonally adjusted basis, but at a rather moderate rate. This does still suggest weak downward fundamental pressure on prices, but in our view not a compelling bearish case," he said. "We think nearby natural gas might find support in the $2.65 area, making a constructive higher low than in late April, with prices to turn higher again once that support is confirmed."

Tom Saal, vice president at FC Stone Latin America LLC, expects a short-covering rally as the June contract goes off the board. In his work with Market Profile, he is anticipating a test of Tuesday's value area at $2.817 to $2.797, and "maybe" a test of a second value area at $2.929 to $2.901 and $3.003 to $2.949.

In overnight Globex trading July crude oil gained 5 cents to $58.08/bbl and July RBOB gasoline fell a penny $1.9714/gal.