August natural gas is expected to open unchanged at $2.88 Wednesday morning as analysts suggest that a short-covering rally could send prices to, if not past, the $3 threshold. Overnight oil markets were lower.

“Expectations for Thursday’s DOE storage report for the week ending July 17 may have firmed somewhat with the addition of more recent estimates somewhat below the early consensus for a 70 Bcf net injection,” said Tim Evans of Citi Futures Perspective in closing comments Tuesday.

Evans’ calculations show a 76 Bcf build, “which suggests some risk of a bearish storage surprise, although we wonder if it didn’t make too large an adjustment for the larger-than-expected 99 Bcf build for the week ended July 10. For now, we’ll stick with the model’s estimate, with today’s change in the forward outlook based on a slightly more moderate temperature forecast.”

His figures show the current year-on-five-year surplus of 73 Bcf increasing to 122 Bcf by Aug. 7. “This growing surplus confirms the market is becoming better supplied on a seasonally adjusted basis, which we view as a downward fundamental pressure on prices. Despite this moderate headwind, we continue to see some intermediate-term potential for a short-covering rally back above the $3.00 level, an upward correction to what we see as an overly conservative valuation.”

Forecasters continue to call for hot temperatures over the southern U.S. in the near term. said in the next seven days it expects moderate demand for natural gas in days one to two but high demand in days three through seven. Further out in its morning eight- to 15-day outlook it predicted that “strong high pressure with hot temperatures will continue over the central and southern U.S., including Texas, where highs will consistently reach the mid-90s to lower 100s. Although the hot ridge will shift over the West during the first few days of August, including over much of California to bring above normal temperatures, during this time cooler air will briefly spill across the northern U.S.

“It will be important to watch to see if the hot ridge shifts back over the eastern U.S. during the second half of the outlook.”

In overnight Globex trading September crude oil fell 70 cents to $50.16/bbl and September RBOB gasoline gave up close to 4 cents at $1.8390/gal.