With the recent string of record-setting storage injection figures still fresh in their memories, natural gas futures traders punished the market yet again Wednesday as expectations for Thursday’s data update continue to call for another triple-digit storage build. Adding to losses from the overnight Access trading session, the August futures contract dove lower at 10:30 a.m. EDT to notch a new three-month low at $5.08. August closed at $5.199, down 11.8 cents.

Heading into the trading session, market watchers agreed that there was a decent chance that support in the $5.24-25 area would hold and allow for a modest rebound Wednesday. However, bears dispelled that notion right from the outset by producing a gap-lower opening print. At $5.24 Wednesday’s opening price in August futures was a spot-on match for the $5.24 low notched April 29.

After seeing support fail early in the session, traders were forced to turn their sights to fundamental market features. As it turns out, however, fundamentals offered bulls little relief from the price weakness. Consensus estimates ahead of Thursday’s storage report call for an injection in the 97-114 Bcf range. While a number of that magnitude would fall short of the recent string of 114-plus additions, it will easily exceed historical analogs. Last year the market injected only 68 Bcf, while two years ago 100 Bcf was stored in the ground. The five-year average is calculated at 76 Bcf. EIA will release its report at 10:30 a.m. EDT Thursday. At 1 p.m. EDT, Nymex will close early for the holiday weekend.

However, unless the EIA unveils another whopper of a report this morning, market watchers sense the market may have exhausted its downside potential for the time being. “Most people are expecting a big number, so there is quite a bit of room for disappointment,” said Tom Saal of Miami-based Commercial Brokerage Corp. At 97 Bcf, Saal’s estimated storage figure rounds out the low side of market expectations.

“You’ve had a decent sell-off this week, the market is oversold on the 120-minute chart and just about everyone out there is bearish. The conditions are ripe for a short-covering rally.” Specifically, Saal targets the $5.263-317 area, which encompasses 70% of the ticks from Tuesday’s session. “Whenever you open below this ‘value area’ of the previous day, there is a good chance that the market will return to and test that level within the next couple of trading sessions.”

However, Saal is not the only person calling for a little bounce. While not specifying the exact time frame for the rebound, Kyle Cooper of Citigroup also looks for a rally. “We are obviously much less bearish after what now amounts to a $1.30 break on the August contract,” Cooper wrote in a note to clients Wednesday. “We have come a long way in a short time and there is the possibility of some heat, and as [Tropical Storm] Bill displayed, always a hurricane possibility.”

That being said, Cooper advised his clients Wednesday to consider closing out their option position, which consisted of being short the August $6.75 call and long the August $5.25 put. Adding the 5-cent net premium collected a couple of weeks back when the position was initiated with the 25-cent net premium collected Wednesday, Cooper touted a total profit of roughly 30 cents. “Although still basically bearish, this is very profitable and we consider it likely that we will be able to re-establish another short position from higher levels.”

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