After a mid-morning rally failed to attract much additional buying, natural gas futures ground lower Tuesday as traders managed to look past the hurricane bearing down on the Texas coast to focus on an improving supply situation. August futures closed at $5.02, down 8.2 cents for the session and 18 cents off its morning top. At 78,773, estimated volume was healthier than it has been lately, adding credence to the move lower.

Claudette became the first hurricane of the 2003 Atlantic basin hurricane season overnight Monday as she slogged her way toward the Texas coast. Armed with this news, bulls struck first at Nymex Tuesday morning, and were successful in boosting the market to a daily high of $5.20. However, even before Claudette made landfall at 1 p.m. EDT, the futures market was already in the process of moving lower. Steady selling was seen throughout the afternoon and prices pressed down to the $5.00 mark. Support there held, leaving the market at a precarious overnight perch in the low $5.00 area.

Traders and market watchers agreed that Tuesday’s weakness was attributable to a lack the scale-down buying that was present in the two April moves down to the $5.00 area. Perhaps buyers are letting the market come to them. A quick look at the latest National Weather Service medium-range forecast shows a growing area of below-normal (read bearish), temperatures in the northeast corner of the country through the end of July. That coupled with expectations for another large storage injection Thursday, has bears confident lower prices are still to come.

Thomas Driscoll of Lehman Brothers in New York might be the biggest bear of them all this week in calling for a hefty 110 Bcf refill for the week ending July 11. His prediction now forms to the upper end of the market’s 87-110 Bcf range of expectations. If realized, a number of this magnitude would be bearish, easily eclipsing the year ago injection of 69 Bcf as well as the five-year average of 76 Bcf.

Even though most chartists now believe the longer-term trend has turned down, there still exists the potential for a short-covering rally. The April 3 continuation chart low at $4.885 might be an excellent springboard for this rally, which could push prices back up as high as the $5.85 level. Below $4.885, chartists see support at the $4.69 low notched by the February 2003 contract on Dec. 31.

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