After failing to completely fill a chart gap left from lastweek’s precipitous decline, the futures market slipped loweryesterday as bears were victorious ahead of weekly storage data.The October contract was hardest hit, suffering a 6.5-cent declineto finish at $2.612 amid average trading volume.

“Close, but no cigar,” quipped one Gulf Coast trader in responseto the market’s inability to fill the chart gap between $2.63 and$2.71. “It was a commendable attempt coming off the holidayweekend. But by only getting a partial fill, the market wassusceptible to another sell off,” he reasoned.

He did, however, point to another day of steady demand forphysical supplies as an encouraging sign for bulls. “Utilities wereonce again out in the spot market today buying gas to fill storageand cover shorts created when they turned back gas for [Sept.1-3].” He said it makes sense for utilities to buy all they can atcurrent levels because it will be very easy to rationalize to theirpublic utility commissions purchases made at first of month indexminus 25. NGI’s September Bidweek price for the Henry Hub was$2.90, and today’s daily average is a $2.66.

However, strong physical demand for storage injections can besomewhat of a “Catch-22” for the market and yesterday was a perfectexample of that. According to the American Gas Association, 66 Bcfwas added to underground storage facilities last week, bringing thetotal to 2,587 Bcf, 120 Bcf less than year-ago levels but still 75Bcf more than the five-year average. Nearly all traders contactedby NGI felt the injection was bearish as it surpassed bothpreliminary estimates centered on a 50-60 Bcf refill and lastyear’s 35 Bcf figure.

By early yesterday evening, it was apparent the market alreadyhad priced that bearish sentiment into the prices because theOctober contract was able to move 4.8 cents higher to $2.660 inAccess trading.

What about the new hurricane activity brewing in the tropics?”Anemic,” according to another trader who downplayed the potentialthreat to Gulf of Mexico gas production. The National HurricaneCenter upgraded Tropical Depression Eight to Tropical Storm Floydearly Wednesday. Last night the storm was still well east of theLeeward Islands in the Caribbean but was expected to intensify intoa hurricane today. Some models suggest that a trough of lowpressure from the east could bend Floyd to the north in the nextfew days.

Looking ahead, a Houston marketer believes the real test for themarket will come today and Friday when much of the East Coast willreceive its first blast of shoulder-month weather. “Nobody wants toget stuck holding contracts when the music stops, especially in ashoulder month,” he said.

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