One day after the Dow Jones Industrials recorded one of the largest single-day point losses ever, the feeling on Tuesday was that investors might have gotten a little bit carried away. Bargain hunters rushed to Wall Street and to commodity markets on Tuesday, resulting in significant climbs on the day.

The Dow was pushed nearly 500 points higher, while November natural gas futures gained 21.7 cents to close at $7.438 and November crude futures added $4.27 to finish at $100.64/bbl. The strength in markets was also attributed to the belief of some that a form of the defeated $700 billion Wall Street bailout package might be pushed through by the end of the week. To that end, President Bush on Tuesday said Monday’s defeat was “not the end of the legislative process.” Whether a revised bill might make it through is far from a given.

“The petroleum markets are in a similar posture to the equity markets, with bargain hunting emerging after Monday’s sharp drop that followed a failed effort in the U.S. House of Representatives to pass a proposed $700 billion financial rescue plan,” noted Tim Evans, an analyst with Citi Futures Perspective in New York. “A hope that a revised bill might still win speedy passage has helped lift the market off their lows.”

Natural gas futures have been comfortably trading within the $7-8 range for almost the entire month of September, but some market watchers say it might break out in one way or the other soon as fall sets in and heating concerns versus available supply is weighed.

“The natural gas market is considering the upside again in sympathy with the rebound in petroleum markets,” Evans added. “While there is a case to be made for a seasonal rally over the next two months or so, the market will have to build a case for it despite rising output from the Gulf of Mexico and storage data that may be bearish at least some of the time. Thursday’s report, for example, may feature an 85 Bcf net injection for the week ended Sept. 26, which would look bearish relative to either the 51 Bcf build in the prior week or the 72 Bcf five-year average increase.”

Some market analysts suggest that the gas market could display some separation from the financially driven moves in the equity market. “This [natural gas] market certainly has the ability to go its own way by disconnecting from the petroleum price moves as well as disassociating itself from much of the financial upheaval that has roiled virtually every equity, credit and commodity market this week,” said Jim Ritterbusch of Ritterbusch and Associates. He also noted that on a percentage basis the large swings in the oil complex will be difficult for natural gas to match, and the “huge daily price swings in oil will equate to around twice that of the natural gas on a percentage basis.”

A Houston broker said he sees the market more simply, noting that the stars are currently aligning for the bears. “Supply keeps growing; demand is waning, and prices are still too high, and that’s unlikely to change.”

Gulf of Mexico natural gas production continues to creep back after being shut in ahead of hurricanes Gustav and Ike. From 53 operators’ reports Tuesday, the Minerals Management Service estimated that 45.7% of the 7.4 Bcf/d of natural gas production in the Gulf is still shut in (see related story).

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