Following Tuesday's pressure release that saw the May natural gas contract lose 24.5 cents, traders on Wednesday were able to resume their course towards higher prices despite the continued easing of tensions in the Middle East. The prompt month gained 8.9 cents Wednesday to finish at $7.515.

To get a full understanding of Wednesday's trade, one had to include the Tuesday session as well in their analysis, a Washington, DC-based broker said. "Tuesday's action was very interesting. We had what was on its face a mildly bullish hurricane forecast from Phil Klotzbach and William Gray, yet natural gas futures came off more than it had in two weeks or so," he said. "While some were talking about the sell-off being tied to the easing of tensions in Iran, I think it was simply a correction to a sustained rally. We've been in a nice rally from the sub-$7 area up to $7.700 and we hadn't had much of a correction, so I think that is what we saw Tuesday. Whether it was because of the Iranian news or a round of 'buy the rumor, sell the fact' on the hurricane report, is irrelevant."

With the way Tuesday played out, Wednesday's activity became pivotal, he said. "We made a slightly lower low on the day but then managed to rally, which validates Tuesday's correction as an orderly wave of profit-taking. People came in on Wednesday and were decent buyers. We saw some commercial buying activity on the day, so we are still in a moderately bullish mode here and I think things will probably stay that way. To use a wonderfully overused technical term, we had gotten a little bit overbought and Tuesday's pullback relieved that situation. Most of Wednesday was the prompt month working higher."

Looking ahead, the broker said people are still trying to decipher what the expectations for summer weather will be. "I've seen a lot of trade talk surrounding 'structural issues,' such as where are we getting supply to meet our growing demand," he said. " For resistance, I see $7.800 and then $8. As for support, I see $7.050 if we were to pull back significantly."

Market technicians noted that Tuesday's plunge to $7.426 breached market support levels as $7.545 represented the "0.236 retracement of the entire advance from the $6.812 low. Tuesday closed decisively below this key pivot," said Walter Zimmerman of United Energy. According to Zimmerman, the next target is $7.415 as the 0.382 retracement of the advance.

The weak technical picture coincides with seasonal patterns. "The average date of the preseason cooling degree day rally is the 17th of May," Zimmerman said. Bears should tread lightly. He cautions that the downside risk during April is always an earlier than usual preseason rally peak, and in 2005 and 2006 the preseason rally peak occurred in April. "Peg $7.185 the must hold for the bulls as 0.618 of the $6.812 to $7.791 rally," he said.

Looking to Thursday's Energy Information Administration natural gas storage report for the week ended March 30, which marks the last report of the traditional withdrawal season, most people within the industry are expecting an injection between 40-60 Bcf. Adding a level of importance to the report is that it falls on the last trading day of the holiday-shortened week, so traders will be getting their books in shape ahead of the long weekend.

The Washington-based broker said he was expecting a 45-50 Bcf injection, while a Reuters survey of 21 industry players expected storage supplies to rise by approximately 51 Bcf. Golden, CO-based Bentek Energy's Flow Model indicated an injection of 59 Bcf, bringing stocks 7.5% below the five-year high (last year) and 27.4% above the five-year average. Bentek said it expects that the East region injected 34 Bcf, the Producing region injected 22 Bcf and the West region chipped in 3 Bcf for the week. The ICAP storage options auction Wednesday afternoon revealed an expected build of 55 Bcf.

The number revealed Thursday morning will be compared to last year's 24 Bcf withdrawal and the five-year average withdrawal of 12 Bcf.

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