For the second session in a row, natural gas prices gapped lower at the opening bell Tuesday, as mounting apprehension over today’s storage report convinced traders to lighten their long exposures a little more. But in stark contrast to Monday when prices continued lower throughout the session, gas prices rebounded slightly in the afternoon, filling in the earlier chart gap. The June contract closed at $4.641, down 5.4 cents for the day.

Considering the fact that prices have fallen in ten of the last eleven trading sessions including the last seven-straight, traders are wary of the growing potential for a rebound. However, bottom hunters who have been burned trying to pick a bottom near the $5.00 level and then again at the $4.85-87 area, are a little more tentative now, several traders observed. Also a factor in their decision is the expectation for a robust storage injection to be announced by the American Gas Association this afternoon.

As has been the case lately, Tuesday saw those expectations upgraded, as market watchers and analysts are now looking for as much as a 100 Bcf injection to not only dwarf the 32 Bcf refill from last year, but also set a new record refill figure for the month of April. One week in April 1994, the market added 82 bcf to underground storage facilities — a feat that has not been bested since.

And while Tom Saal of Miami-based Pioneer Futures does not completely rule out a new record, he estimates the AGA will announce a more conservative 68 Bcf injection Wednesday. However, what the market will do once the report is announced is anyone’s guess, he admits. “It wasn’t too long ago that people were calling for the market to find a bottom at $5.00. Then it was $4.50. Now, you have the $3.50 area getting a lot of attention as a level of support. While it seems that all the bearish news is already factored into this market, you have to remember that demand holds the key to the price level.

“People say that demand is down because gas prices are high compared to alternative fuels and that demand will continue slack as the economy slows. But I can see flaws in both of those theories. GDP was actually up 2% during the first quarter and crude oil is making a hell of a run at $30.00…. Even if we do get a 100 Bcf injection, this market will still be way behind the eight ball to get to a comfortable storage level by withdrawal season, and there is still plenty of summer left between now and Nov. 1,” Saal reasoned.

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