May natural gas is set to open 5 cents lower Wednesday morning at $2.63 as traders retool their forecasts and incorporate an upcoming warming trend. Overnight oil markets fell.

Tuesday’s futures markets moved little, actually adding ground in spite of “updated temperature forecasts that were warmer overall than a day ago, subtracting some late-season heating demand from the overall equation,” said Tim Evans of Citi Futures Perspective in closing comments Tuesday to clients.

Evans calculates a build of 7 Bcf in Thursday’s storage report and sees subsequent injections above the five-year average. “The year-on-five-year storage deficit that was 190 Bcf as of March 27 would decline to 116 Bcf on April 24, with no particular reason why the moderately bearish trend would not continue beyond that date. A declining deficit confirms the market is becoming better supplied on a seasonally adjusted basis.

“From an intermediate-term perspective, we remain open to the possibility that it may not take that much of a shift in the background fundamentals to help natural gas establish a bottom. But for the moment we don’t see any immediate fundamental trigger that would help natural gas turn the corner.”

Evans is on the sidelines for the moment but suggests working a buy stop at $2.73 as a long entry in the May futures contract. He says to limit initial risk on the trade with a sell stop at $2.58.

Forecasters see a modest warming trend. In its morning six- to 10-day outlook, WSI Corp. said, “[Wednesday’s] six-10 day period forecast is generally warmer than the previous forecast over the eastern two-thirds of the nation but cooler over the West due to model trends and the day shift. As a result, period GWHDDs are down 5.5 to 33.8 for the CONUS.

“Forecast confidence is near average today based on reasonably good model agreement, even with some of the changes since yesterday. However, there are still typical technical and timing differences with a series of storm systems during the period. The Rockies and Northern Plains have a risk to the cooler side due to a potential storm system, while a backdoor cold front or onshore flow supports a risk to the cooler side into the Northeast. The southern U.S. has a slight upside risk.”

Observers have noted that with the explosion of shale gas production from the Appalachia region along with a reconfiguration of gas flow to eastern markets, it might be worthwhile to add if not change the delivery point of futures contracts from the Henry Hub to a point more in aligned with current gas flows and markets.

In a webinar given Tuesday by NGI, Pat Rau, NGI director of strategy and research, said he is not optimistic that this is likely. “Trading basis off the Henry Hub is just interwoven into the fabric of this industry. There are far too many financial and physical contracts tied to the Henry Hub, and a switch to Appalachia basis would not be costless. Contracts would have to be renegotiated and there would be a lot of cost involved,” he said.

In overnight Globex trading May crude oil fell $1.19 to $52.79/bbl and May RBOB gasoline shed 5 cents to $1.8136/gal.