Natural gas futures support at $4 held up once again on Wednesday, but traders said a $3 handle was likely still in the cards, maybe as early as Thursday morning due to the widely held expectation that the industry will see its first storage injection two weeks earlier than normal.

The April contract put in a low of $4.052 Wednesday before closing at $4.105, down 2.5 cents from Tuesday’s finish. Traders continue to knock on the sub-$4 door, but so far to no avail. Wednesday marked the fifth consecutive session that the April contract has traded below $4.100 but failed to even dip below $4.

“I think a trip below $4 is likely right around the corner with Thursday morning’s fresh storage data,” said a Washington, DC-based broker. Looking at Thursday morning’s storage report for the week ending March 19, he said he expects a 5 Bcf build, which would mark a switch to injections two weeks earlier than normal. However, the broker said the $4 level is not the support he is concerning himself with as the $3.820 level holds far more weight from a technical perspective.

“The September-to-January rally was almost a textbook five-wave advance under the Elliot Wave theory and we are in an almost-textbook five-wave decline currently,” he told NGI. “We are still in the wave three lower, which is supposed to be the most aggressive. At some point it will finish up — perhaps at $3.820, which marks a 61.8% retracement of the September-to-January move.”

Looking ahead, the broker said the big battle will likely be between the rig count coming back on and the bit of industrial demand that appears to be coming back into the market. “Yes, the demand has started to perk up a little bit, which is normally a sign that a price bottom is not far off,” he said. “However, the producers have come back collectively and are firing rigs into service, so we are left with the question of whether the rising rig count will more than offset the industrial demand that is coming back in.

“We’ll keep an eye on that question, but as of right now we are still solidly bearish. Even if we hold at $3.820, any bounce at that point could be dismissed as a rally in a bear market. My theory is wrong if we punch back above $4.250 with a rocket ship-like vengeance. If that happens, then things certainly need to be recalculated.”

Unsupportive weather forecasts continue to make life difficult for the bulls. MDA EarthSat in its Wednesday morning six- to 10-day forecast showed a broad area of above-normal to much-above-normal temperatures across the country extending east of Nevada and north of a line from South Carolina to southeast Texas.

“A combination of progression and some day-on-day changes has produced a considerably warmer composite map [Wednesday]. Confidence in the impending warm-up continues to increase as support grows,” the forecaster said. Strong southerly flow and a building ridge will combine to generate “widespread much-above and strong above-normal temperatures through the heart of the nation by the second half of the period. A gradual warm-up should also occur in the East late, but not to the intensity of the Midwest. Oppositely, the Southwest will cool to below [normal] by the second half as a trough settles in along the coast.”

Some market watchers are banking on the recent stretch of mild weather to seal the fate of those believing $4 market support will hold. “[Thursday’s] report should indicate the first storage increase of the season as a result of last week’s relatively mild temps,” said Jim Ritterbusch of Ritterbusch and Associates.

He added that “an exceptional warm spell that is expected to start next week and extend through the first week of April is conjuring up ideas of some unusually strong storage increases going forward. All in all, we are maintaining a bearish view of this market as we will be looking for a test of the $4 psychological level during the next couple of sessions.”

Taking a closer look at Thursday’s storage report, a Reuters survey of 27 industry players produced a range of expectations from a 13 Bcf draw to a 25 Bcf build with an average expectation of a 9 Bcf build. Bentek Energy is projecting an injection of 10 Bcf, which would bring inventory levels to 1,625 Bcf. The research firm expects the Producing and West regions to inject 15 Bcf and 2 Bcf, respectively, with the East Region withdrawing 7 Bcf.

The number revealed at 10:30 a.m. EDT will be compared to last year’s date-adjusted 2 Bcf draw and the five-year average draw of 36 Bcf.

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