June natural gas is expected to open a penny higher Wednesday morning at $1.99 as traders attach little significance to Tuesday's breach of $2 and concentrate on near-term weather-driven demand. Overnight oil markets were mixed.

Traders noted that Wednesday's fall beneath $2 could have been the result of options strategies making $2 call options worthless should the June contract settle under $2 at today's options expiration.

Analysts see sub-average storage builds continuing. "While U.S. seasonal demand for natural gas may be at a low ebb, allowing nearby futures to revisit the $2.00 level, we continue to see enough cooling demand to limit storage injections to something less than five-year average rates," said Tim Evans of Citi Futures Perspective.

Evans projects a build of 60 Bcf in Thursday's storage report, well below seasonal averages, and under his assumptions of weather, the current 795 Bcf five-year surplus is expected to be whittled down to 734 Bcf by June 10.

"The declining surplus confirms the market is becoming tighter on a seasonally adjusted basis, a supportive fundamental trend. This prospect may not be sufficiently compelling to prevent the price weakness we've seen over the past two sessions, but should certainly help to limit the downside over the intermediate term in our view," he said in closing comments to clients.

Evans is holding a long position in July futures initiated earlier at $2.105 with a protective stop at $2.115.

Cooling demand near term in major population centers is seen above average, according to National Weather Service (NWS) forecasts. For the week ending May 28, NWS expects New England to see eight cooling degree days (CDD) or five more than normal. The Mid-Atlantic is predicted to experience 22 CDD, or 13 above normal, and the greater Midwest from Ohio to Wisconsin is forecast to endure 36 CDD, or 19 more than its seasonal norm.

In overnight Globex trading July crude oil rose 38 cents to $49.00/bbl and July RBOB gasoline fell a penny to $1.6448/gal.