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Bulls, Bears Awaiting Storage Figures; September Called A Penny Higher

September natural gas is expected to open a penny higher Thursday morning at $2.57 as traders await inventory data that is expected to show additions continuing at below normal rates. Overnight oil market narrowly fell.

The delineation between bullish and bearish is currently in play, but "the key line in the sand that separates the bull case from the bear case is $2.45 and is entirely within reach in Thursday's trading. It's $2.45 or bust for the bulls," Walter Zimmermann of United ICAP told NGI.

"It's also $2.45 or bust for the bears because they don't have a case unless they can break the market below $2.45. Wednesday was a relatively small trading range, but if we have another day like we had Tuesday, we'll be knocking on the door of $2.45.

"The bullish case is that natural gas holds $2.45, rebounds and peaks somewhere above $3, and then we get a deeper correction, which targets somewhere between $1.95 and $1.92. The bear case is that the move up from $1.611 peaked at $2.998 and that was the seasonal peak.

"In defense of the bearish case we have seen time and time again what typically ends the winter to spring pre-season rally is the seasonal dump in crude oil prices. That process is well advanced. Crude oil has definitely been under pressure here, and natural gas has been doing an admirable job of holding its own, but as crude oil continues to implode that takes another reason away to chase natural gas prices higher."

Both bullish and bearish cases will get a test with the 10:30 a.m. EDT release of storage data by the Energy Information Administration (EIA). Currently, working gas inventories stand at 3,288 Bcf and are a plump 464 Bcf above the five-year average. Bulls, however, point to the fact that weekly storage increases have not come any where near historical norms. This week is no different.

Last year 57 Bcf was injected, and the five-year pace stands at 53 Bcf. Estimates are running about half that.

United ICAP expects a build of 26 Bcf, and industry consultant Bentek Energy calculates a 27 Bcf build utilizing its flow model. A survey of 19 traders and analysts by Reuters revealed an average 25 Bcf with a range of 10 to 35 Bcf.

In overnight Globex trading September crude oil fell 8 cents to $41.63/bbl and September RBOB gasoline fell fractionally to $1.2924/gal.

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