May natural gas is set to open 3 cents higher Wednesday morning at $2.12 as expected lean near-term storage as well as strong technicals put the ball squarely in the bulls' court. Overnight oil markets eased.

The recent slow pace of storage builds has, for the moment, energized the bulls, but after this week's report, the pace of injections should increase. Tim Evans of Citi Futures Perspective calculates a 3 Bcf build for this week's report, well below last year's 82 Bcf input and a five-year average of 46 Bcf.

Going forward, Evans forecasts the year-on-five-year surplus currently at 849 Bcf will decrease slightly to 833 Bcf by May 6.

Evans doesn't seem to be buying the notion that lean storage builds were part of Tuesday's rally. In his view it was "either based on some other intermediate-term idea, such as declining production or the forecast for a warmer than normal summer, or that it is more technical in nature."

Market technicians see seasonal factors in play. "With natural gas inching above the prior high at $2.074, it very much looks like the up trend has been reestablished," said Brian LaRose, a market analyst at United ICAP, in closing comments Tuesday. "So just how high can we go from here?

"Assuming an ABC-type pattern is unfolding from the $1.611 low [March 4] the A=C objectives will be our initial upside targets; 0.618 of (A)=(C) cuts at $2.158. (A)=(C) is up at $2.335. Reminder, $2.324-2.400 also represents our ideal objective for a seasonal advance."

Other market technicians see gains continuing. "We had the market in a wave 3 coming into this week and we have a target for the wave 3 up to as high as $2.45. Elliott Wave projections have at least another dime in this move," said Elaine Levin, vice president at Powerhouse LLC, a Washington DC-based trading and risk management firm.

On the weather front, conditions moderated slightly. WSI Corp. in its morning outlook said, "[Wednesday's] 11-15 day period forecast features above average temps across the northern tier and the eastern U.S. Below average temperatures are most likely across the southwestern U.S.

"Today's forecast is warmer over the East and cooler over the central U.S. CONUS GWHDDs are down 2.1 for Days 11-14 and are now forecast to be 20.2 for the period."

Tom Saal, vice president at FCStone Latin America in Miami, in his work with Market Profile says to follow the breakout of the week's initial balance, which he places at $2.091 to $1.890. Breakout targets higher are the 50% level at $2.192 and 100% at $2.292. Other trading targets include Tuesday's value area at $2.060 to $2.010, as well as value areas at $1.990 to $1.976, and $1.943 to $1.913.

In overnight Globex trading May crude oil fell 82 cents to $40.26/bbl and May RBOB gasoline eased a penny to $1.4684/gal.