Despite a second-straight day of lower cash market prices, natural gas futures rebounded Tuesday as local traders hitched a ride on the backs of fund and speculative buyers. With that the May contract advanced 6.5 cents to close at $5.125. In doing so, May has finished in the $5.10s in five of its last eight trading sessions. At 50,568, estimated volume was again weak, proving that the market is stuck in a bit of trading rut.

Market watchers Tuesday continued to point to the wait-and-see approach that many traders are taking during this, the shoulder month period of natural gas pricing. Because a considerable amount of risk is perceived both to the upside and to the downside, many players are electing to stand on the sidelines until a clearer picture — either fundamental or technical — is available.

But while futures prices are based on the market’s rational expectations of supply and demand at some later date, the cash market is influenced by fundamental factors impacting the market here and now. With moderating temperatures across much of the eastern half of the country, that meant lower physical prices Tuesday. NGI’s Henry Hub index dropped nearly a dime to average $4.90 yesterday.

Probably the biggest fundamental market concern out there right now is whether the market will be able to refill enough gas into storage during the seven month injection season so that stocks do not run short should the nation experience another cold winter. Now that the injection season has begun, the game of estimating the ending inventory level on Nov. 1 is in full swing. “An [injection in the 21-30 Bcf] range would continue to place inventories on track to reach 2,800 Bcf by Oct. 31 if the weather [is] normal and [the] same relationship to historical regression remains in place,” wrote Kyle Cooper of Salomon Smith Barney in a note to customers Tuesday. However he is quick to footnote that extrapolated figure, adding that a small deviation in the rate of injections now can dramatically affect the larger refill figures expected later in the season.

For Tim Evans of IFR Pegasus in New York the interesting report will be next Thursday. “With New York cash quotes back over $6.00 [for gas day Tuesday], there is some incentive to rely on remaining storage, pointing to a draw in next week’s DOE figures,” he wrote Tuesday. In the meantime, Evans looks for a injection of 10-20 Bcf this Thursday.

However, Thomas Driscoll of Lehman Brothers believes the injection season is here to stay and looks for a 30 Bcf refill this Thursday to be followed by a 20 Bcf build next Thursday. If he is correct, it will compare quite bearishly versus the year-ago withdrawals of 61 and 9 Bcf respectively.

In daily technicals, Craig Coberly of GSC Energy in Atlanta sees the potential for May to drop down to the $4.90-95 range in the next few days. However, barring a solid break below that level, Coberly sees support holding and giving the market a base on which to mount a rally.

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