Following a three-day, 13.5% decline off last Wednesday’s highs, natural gas futures checked quietly sideways Tuesday as locals picked each others’ pockets and bulls waited in anticipation of supportive storage news due out Thursday. As evidenced by the strong interest in the out months, strip buying was seen to lift prices at the closing bell. The December contract finished 2 cents higher at $3.883. The 12-month strip, meanwhile, advanced 3.6 cents to finish at $3.868.

Tuesday’s relative calm gave traders a moment to sit back and assess the price situation. While the market remains in a bearish posture with both technicals and weather pointing to lower prices, it was unable to continue lower. That failure to slide lower, coupled with the oversold conditions prevalent in the market, has market-watchers looking for a bit of short-covering ahead of the storage report.

“While the recent decline does have a shift in the weather outlook toward more moderate and even warmer than normal temperatures behind it, the nascent downtrend may still have to navigate around what may be bullish storage data from last week,” wrote Tim Evans of IFR Pegasus in New York. Looking toward Thursday’s report specifically, Evans calls for either a withdrawal or an injection of less than 10 Bcf to fall short of the 20 Bcf injection from a year ago, thus serving to diminish the year-on-year surplus, currently at 40 Bcf.

“Natural gas still has a longer-term overvaluation to correct, as well as seasonal tendencies to trend down to a significant January bottom, but there is also room now for a short-term bounce,” he continued.

Other forecasts are even more bullish. “Our final estimation for this week’s report looks for a draw from between 10 and 20 Bcf,” wrote Kyle Cooper of Salomon Smith Barney in a note to customers Tuesday. And while admitting that it is only speculation at this point, he believes next week’s report could see a draw as “high as maybe 50 or 60 Bcf.”

In daily technicals, Evans sees minor support associated with failed support at $3.91. A move above $3.91 could lead to a press higher to fill in last weekend’s chart gap between $3.995 and $4.035. On the downside, the confluence of Monday’s and Tuesday’s lows for December in the $3.83-84 area becomes the first floor. A break lower could lead to December’s low from early September at $3.754 as well as spot support at $3.67.

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