Traders of physical gas for weekend and Monday delivery must have had one eye on the futures screen as both markets sustained about equal losses.

The NGI National Spot Gas Average gave up 7 cents to $2.54 as gains in the Northeast were hopelessly outmatched by losses in the Rockies, California and Southeast. Futures traders seem to be focused on the absolute and elevated level of storage rather than the recent trend of thin injections.

At the close, September had fallen 6.2 cents to $2.772 and October was lower by 6.8 cents to $2.809. September crude oil eased 13 cents to $41.80/bbl. The Dow Jones Industrial Average gained 191 points to 18,543 on favorable employment data.

Observers noted that the futures managed to retreat following Thursday’s extraordinary summer storage withdrawal, only the third since natural gas storage data has been gathered (see Daily GPI, Aug. 4).

“Right now it looks like the market is focused on the level of storage rather than the injections,” said Tom Saal, vice president at FCStone Latin America LLC in Miami. “The market is considering the weekly storage numbers as only temporary and is looking forward to when shoulder season builds will become greater.

“We are talking about September here and at that point the worst [warmest] weather is likely behind us. I do think that if storage ends the season where it did last year and we continue with high power burns, it will be bullish for the market. Right now it’s a touchy situation and the market is just treading water.”

The Thursday storage report from a fundamental standpoint demonstrated just how conflicted the market is. It was only the third time since storage data has been kept that a summer withdrawal has been reported. The 6 Bcf storage withdrawal at the end of the day, however, elicited only a half-cent move lower in September futures to $2.834.

“No change,” said Brian LaRose, a market technician with United ICAP. “Bulls need to lift natgas over $3 to revive the up trend. Bears need to push natgas beneath the $2.625-2.591 lows to make a case for a deeper retreat. As long as natgas remains rangebound we are stuck in a holding pattern. Looking for a pop to $3.190 minimum if the bulls can get through resistance. Looking for a drop to $2.500-2.468 minimum if the bears can take out support,” he said in closing comments Thursday.

The lack of market follow-through seems to have ended the patience of some market bulls. “It…appears that some long position holders are throwing in the towel following [Thursday’s] lack of upside price response to what appeared to be a bullish EIA storage figure,” said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients. “The withdrawal of 6 Bcf…accelerated the contraction in the supply surplus against five-year averages by a whopping 60 Bcf. This dynamic of a reduction in the surplus will be furthered again next week by an additional surplus decline of as much as 30-40 Bcf that would cut the overhang to as low as 425 Bcf. While this is still a large supply excess in absolute terms, the rate of change (second derivative) is still an important bullish consideration that will be limiting downside price follow-through.”

Another factor likely to diminish downside price risk is increasing exports of natural gas. The United States exported 104.63 Bcf (3.38 Bcf/d) to Mexico through pipelines in May, the most of any month on record and a 21% increase compared with 86.81 Bcf (2.80 Bcf/d) exported in May 2015, according to Energy Information Administration (EIA) data (see Daily GPI, Aug. 2).

While exports to Mexico set a record, almost all U.S. gas exports were up. Overall, U.S. natural gas exports were up 32% in May at 177.28 Bcf compared with 134.27 Bcf in May 2015, according to EIA.

Besides Mexico, exports to Canada, Chile and Kuwait combined to increase exports of LNG.

“On the flip side, we will reiterate that upside price possibilities will remain restricted by the bearish influence of a sizable storage surplus that exists amidst rising production that could emanate from this summer’s upswing in the rig counts. The rise in the oil rigs now appears to be translating some leveling in shale production in upping the possibility that associated natural gas production could prove stronger than widely perceived. Unless this factor receives an offset in the form of a major hurricane event into the GOM, the output factor could begin to slow the decline in the surplus.

“Overall, this market still looks like a standoff from our perspective as both the bulls and the bears appear to possess equally strong arguments. In sum, a range bound trade is still anticipated.”

The closely watched employment report from the US Labor Department revealed non-farm payrolls increased by 255,000 during July, well above the 185,000 expected by economists. The unemployment rate remained flat at 4.9%.

In physical trading weekend and Monday gas prices at California points fell as much as any locations as next-day power loads were forecast to decline. CAISO predicted that Friday’s peak load of 35,934 MW would drop to 34,108 MW Saturday.

Gas at Malin fell 6 cents to $2.71, and deliveries to PG&E Citygate lost 3 cents to $3.18. Gas at the SoCal Citygate was quoted 14 cents lower at $2.74, and gas priced at the SoCal Border Avg. Average shed 13 cents to $2.73.

Gas on El Paso S. Mainline/N. Baja fell 10 cents to $2.80 and packages on Kern Delivery were down 15 cents to $2.74.

Other market points softened as well. Gas bound for New York City on Transco Zone 6 lost two cents to $1.53, and deliveries to the Chicago Citygate changed hands at $2.76, down 8 cents. Gas at the Henry Hub fell 4 cents to $2.85, and gas on El Paso Permian skidded 8 cents to $2.64.