May natural gas is set to open 4 cents lower Tuesday morning at $2.02 as traders balance an expected renewed expansion of the long-term storage surplus with a resilient technical outlook. Overnight oil markets rose.

Market technicians are taking a close look at the pending expiration of the May contract on Wednesday and where the June contract is likely to trade. "While natgas took a hit, the June contract managed to hold above Monday's high in flat price," said Brian LaRose, a market analyst with United ICAP.

"Now with the May contract approaching expiration, we will be very interested in where June rolls into the spot position. To suggest the $2.176 high [Monday] represented a top of some kind June would need to crack $1.937. Bulls still have a shot at the $2.335-2.400 vicinity later this month otherwise."

Fundamental analysts are taking a more bearish stance. "[Monday's] 13-cent selloff after posting 10 week highs at the start of the week is suggesting some buying exhaustion as well as the likelihood that production slippage and some cooler temperature trends have been largely baked in," said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients on Monday. "Additionally, the market is expected to see a return to above normal storage injections with the issuance of this Thursday's EIA report. We are looking for a figure at around the mid 60 Bcf area that would easily exceed the five-year average build of about 52 Bcf.

"This renewed expansion in the supply surplus against normal levels could help to contain this strong price up spike that was kicked off last Tuesday from below the $1.90 mark. And while we will concede to some slowing in production that is finally beginning to spin off of the plunge in the rig counts, this output slippage could still be largely offset by an uptick in imports given Canadian supply availability. All in all, we are maintaining a short-term bearish stance for now as we continue to highlight a recent dramatic weakening in the front switch ahead of Wednesday's May contract expiration."

Weather forecasters are seeing a transition from less heating load to the beginnings of cooling demand. WSI Corp. in its Tuesday morning report said, "The latest six-10 day period forecast is for above average period anomalies across the West into the northern tier, as well as the Southeast. Below average period anomalies are forecast across the greater south-central U.S. and Northeast.

"Today's forecast is generally warmer than yesterday's forecast, except across the southern tier. As a result, CONUS GWHDDs are now down 5.1 to 29.3 for the period. PWCDDs are up 1 to 11.2."

In overnight Globex trading June crude oil added 42 cents to $43.06/bbl and June RBOB gasoline rose 2 cents to $1.5483/gal.