August natural gas is expected to open 4 cents lower Wednesday morning at $2.69 as traders are willing to concede downside territory even though increases in weekly supply figures continue to fall well below historical averages. Overnight oil markets fell.

By most accounts, Tuesday’s trading was one of consolidation, with the August contract limited to a modest 7-cent range. Analysts note that the trend of storage builds has been far below normal in recent weeks.

“While the declining storage surplus is a fundamental support for natural gas prices, it may not be enough to keep the market from moving at least somewhat lower in the near term in our view. Storage remains at a record high and 507 Bcf higher than a year ago, which suggests natural gas may need to maintain a price discount to a year ago,” said Tim Evans of Citi Futures Perspective in closing comments Tuesday.

Evans estimates a 37 Bcf build for Thursday’s storage report.

Gas buyers for power generation Wednesday will have an active weather landscape to deal with.

“A large ridge of high pressure will build over the southern Plains,” said Kari Strenfel, a meteorologist. “This high-pressure system will usher warm and moist air over the Plains and the Midwest, [and] a wave of low pressure will transition slowly across the northern Plains.

“This system will collide with the aforementioned air mass, producing rain and thunderstorms in the northern Plains and the Midwest. Prolonged heavy rain will bring threats of flash flooding to southern Wisconsin, eastern Iowa, Illinois and northwest Indiana. Most of the central and southern Plains will experience hot and dry weather.”

Tom Saal, vice president at FCStone Latin America LLC in Miami, in his work with Market Profile expects the market to test Wednesday’s value area at $2.753 to $2.723. He identifies the week’s initial balance at $2.786 to $2.708. Market Profile methodology requires traders to follow the market either higher or lower should it break above or below the initial balance parameters. He identifies trading targets lower at $2.669 and $2.630 and at $2.825 and $2.864 higher.

In overnight Globex trading August crude oil shed 35 cents to $44.30/bbl and August RBOB gasoline fell a penny to $1.3619/gal.