With its intraday bar chart looking like the EKG of a cardiac arrest patient who didn’t make it, the natural gas futures market followed Thursday’s heart-stopping price drop with flat-line trading activity Friday. On its first day as prompt month at Nymex, the August contract closed 4.8 cents lower at $5.362. At 47,013, estimated volume was extremely light.

Traders agreed that Friday’s quiet trading activity was only natural following the frenzied selling on Thursday. Some traders were still in disbelief over the 47-cent price decline that came on the heels of another in a string of undeniably bearish storage reports.

According to the Energy Information Administration, working gas in storage increased 127 Bcf to 1,565 Bcf for the week ending June 20. In addition to surpassing the 125 Bcf refill of two weeks ago and setting a new record, the latest fill dwarfed the 81 Bcf recorded a year ago as well as the 85 Bcf five-year average. However, the real bearishness of the report, traders agreed, was its ability to surpass virtually all market expectations, which had centered on a 105-120 Bcf build.

At 1,565 Bcf, storage is now 653 Bcf less than last year at this time and 370 Bcf below the five-year average of 1,935 Bcf. And while it may sound like a price-constructive situation, the deficit is down considerably from its peak in April when storage was a whopping 891 Bcf less than its comparable 2002 mark.

Noting that the 127 Bcf injection was 10 Bcf more than the upper end of his predicted range, Kyle Cooper of Citigroup considered the storage report extraordinarily bearish. “Injections over the last six weeks have exceeded actual five-year injections by 34%,” he wrote in a note to customers Thursday. Looking down the road, Cooper calculates that if storage injections continue at this same rate, storage will reach 3,086 Bcf by November.

However, that may actually be the less bearish case. Based on the relatively bullish weather the market has experienced since April, Cooper estimates that ending inventories could be much higher. “Once again, [these large injections] are also despite a temperatures profile that actually would have predicted lower, not higher injections…In relation to the regression models, storage levels are projected to such high levels that we won’t even print them,” he continued.

But while the fundamental bearishness does not look to subside any time soon, it may take a back seat to technical market wrangling early this week. That being said, Craig Coberly of GSC Energy in Atlanta is interested in if and how well the August contract rebounds from Gann support. “What happens at the $5.30-40 support area has very important implications for longer-term price expectations…To gain confidence in the bullish outlook, I need to see gas rally away from the $5.30-40 price area,” he said, noting that a break below $5.11 would signal an end to the uptrend.

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