While the cause of Wednesday’s rally in natural gas futures remains up for debate, the reality is that the June contract erased Tuesday’s 11-cent drop by climbing most of the day to close at $3.887, up 27.2 cents from Tuesday’s finish. The talk among traders on the day was that the upward price action was caused by fund buying, a rupture on Panhandle Eastern Pipe Line, Jim Cramer’s bullish prognosis, or some mixture of the three.

Cramer, the well known financial prognosticator and television personality, said Wednesday morning that the days of lower and lower natural gas futures values might finally have come to an end. Cramer said the bottom in gas must already be in, adding that he bets there is very strong industrial demand at the current low prices.

More potential ammo for the bulls was news of a rupture in Indiana on Panhandle Eastern, which had at least one news service reporting that the incident was a factor in lifting futures values Wednesday morning. However, the pipeline told NGI it was able to keep shipper nominations whole (see related story).

“All commodities were pretty much up on Wednesday,” noted Tom Saal, a broker with Hencorp Becstone Futures in Miami. “In natural gas futures I think there was certainly some fund buying. Cramer might be right, but I’m not ready to call a bottom yet. I am looking for more patterns on the chart still. The funds are still very, very short and sooner or later they are going to have to buy back those positions.”

Looking at resistance price cues that might signal that the lows are already in, Saal said $4 “is a psychological number and offered some pretty good support on the way down. Above that $4.250 is a significant price level. If we settle above $4.600, it would be monumental. I think that would truly signal the change in price direction. Overall, I think we’re going to see some inflation down the road, which will sooner or later show up in commodities.”

Other market experts also debated whether the bottom to the market was in yet. “If it were not for the overwhelmingly bearish nature of the fundamentals in this market, we would actually be slightly bullish,” said Peter Beutel, president of Cameron Hanover, a Connecticut-based energy consulting firm. “The recent increases in this market have occurred despite the lack of anything more than vague hopes that the economic contraction may have seen its worst. Few are actually even willing to take the next step, which would be to predict a gradual strengthening is about to occur. At this stage, the most bullish comment heard is that the worst is over.

“We are not sure that that is enough to generate sustained buying in the face of such heavy inventories and such depressed demand. The question is whether this market could be content to stop making new lows — without feeling a balancing need to rally regularly to new recent highs. In the past, having the worst behind us has given us a change in trend and we are not sure that this market is ready for that, yet,” he said.

Taking a peek ahead at Thursday morning’s natural gas storage report, the honest money is on the Energy Information Administration (EIA) reporting that 93 Bcf was injected for the week ended May 1. A Reuters survey of 24 industry players produced an injection range of 85 Bcf to 109 Bcf with an average build expectation of 93 Bcf. Bentek Energy’s flow model also indicated a 93 Bcf injection, which would bring stocks 1.7% below the five-year high and 23.1% above the five-year average. The research and analysis firm envisions a 58 Bcf injection in the East region, a 22 Bcf injection in the Producing region and a 13 Bcf build in the West region

“EIA stocks are expected to increase by over 90 Bcf for the first time this year,” Bentek said. “Historically the first injections above 90 Bcf in the season occur two weeks later in mid-May.”

The injection revealed Thursday morning at 10:30 a.m. EDT will be compared to the 68 Bcf injection recorded last year for the similar week, which also happens to be the five-year average build.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.