After checking lower in the moments following the 10:30 a.m. ET release of fresh storage data (70 Bcf injection), the natural gas futures market worked its way higher late Thursday morning and afternoon as buyers sided with the seasonal tendency for prices to climb during the month of September. As it turns out, that buying was enough to withstand two distinct selling surges Thursday morning as technical traders attempted to induce a move below key support levels at $4.55 and $4.44. October finished the session at $4.81, up 11.6 cents for the session.

According to the Energy Information Administration, storage increased 70 Bcf to 2,389 Bcf as of Friday, Aug. 29. On face value, the 70 Bcf refill was slightly bullish as it fell near the bottom end of the 70-75 Bcf range of consensus estimates. However, local traders had bet heavily on the number being bullish and had uncharacteristically rallied the October contract to a $4.81 high in the moments before the report was released. The market first dipped following the 70 Bcf report, but then quickly rebounded to etch a new high for the week.

Storage is now 392 Bcf less than last year at this time and 175 Bcf less than the five-year average. With nine weeks left in the typical storage injection season, the market will need to inject an average of 68 Bcf a week to reach the 3,000 Bcf threshold by Nov. 1. Thus far this injection season, the market has stored an average of 88 Bcf a week. Historically, storage injections pick up in the month of September as the weather cools. Early expectations call for an injection next Thursday in the 70-80 Bcf range. Last year at that time the market built 74 Bcf into inventories.

“The number should have been constructive,” said George Leide of Rafferty Technical Research in New York, who was surprised by the market’s post-storage sell-off. “It was 7 Bcf lower than our poll of market participants.” He went on to suggest that the low storage number might be attributable to excess demand caused by remnants of the blackout.

Though admitting that the market’s late morning strength was admirable, Leide will not be convinced the market is out of the woods until a move back above $5.00 is followed by a daily close of $4.93 or higher. “Technically the market has broken down and charts need to be repaired before we can rule out a continuation to the downside.”

Specifically, Leide sees support at $4.44 and might suggest cautiously buying in front of that level. Should the market prove him wrong a sell-stop at $4.37 would limit his losses. “Any longs you put on here you need to be nimble with. The market is not in good shape.”

However, Craig Coberly of GSC Energy in Atlanta was more encouraged by the market’s strength and believes this Thursday’s action could be the prelude to a move back above the $6.00 level. “As discussed before, I’ll initially look for a partial retracement of the decline from the February high, but watch for a more bullish possibility,” he wrote in a note to customers Thursday.

After being skeptical of the market’s chances, Tim Evans of IFR Pegasus in New York has also jumped on the bulls’ bandwagon. “The 70 Bcf in DOE storage injections for last week was on the low end of the range of expectations, although it still managed to better both the 65 Bcf tally from last year as well as the 59 Bcf five-year average refill.” Evans goes on to note that the relatively narrow margin by which the market bettered those benchmarks is constructive and possibly indicative of a shift in the underlying supply and demand. “This may finally be some evidence of the returning industrial demand that was rumored [lost] during the market’s somewhat premature August rally.”

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