Natural gas cash for delivery Friday worked lower in Thursday trading ahead of the Energy Information Administration (EIA) inventory report as next-day temperature forecasts showed a precipitous drop for eastern market points currently under an oppressive heat wave.

The temperature declines made inroads to the next-day power market — key power prices tumbled by double digits, and the NGI National Spot Gas Average fell 4 cents to $2.96.

The EIA reported a larger-than-expected 68 Bcf storage injection for the week ending May 12, but prices drifted higher after the number was reported. At the close, June was down a penny to $3.182 and July was lower by three-tenths of a cent to $3.283.

The 68 Bcf was about 7 Bcf greater than consensus estimates, perhaps indicating less of a changed supply dynamic than a statistical correction to last week’s bullish 45 Bcf (8 Bcf less than expectations).

Prices fell after the number was released. Once the number had been digested by traders, June futures dropped to the morning’s low at $3.161, and at 10:45 a.m. EDT June was trading at $3.210, up 1.8 cents from Wednesday’s settlement.

Prior to the report, traders were looking for a storage build well below historical norms. During the same week last year 71 Bcf was injected, and the five-year average stands at a hefty 87 Bcf. Citi Futures Perspective calculated a 59 Bcf injection, and IAF Advisors was looking for a 64 Bcf increase. A Reuters survey of 22 traders and analysts showed a sample mean of 61 Bcf with a range of +47 Bcf to +66 Bcf.

Traders were not impressed by the market’s response. “It’s kind of sitting in this weird little range,” said a New York floor trader. “People are protecting the $3.15 area and the $3.25 to $3.26 area, but the market doesn’t feel like anything.

“It looks to me that some traders saw the large number and sold, but when it failed to move lower they had to cover. They got burned,” said a trader with FCStone Latin America LLC in Miami.

Others saw the report as neutral. “The reported figure was 6 Bcf above consensus but 5 Bcf below last year and 18 Bcf below the five-year average of 86 Bcf,” said Wells Fargo analysts in Denver. “Based on our storage model, this data point indicates that the natural gas markets are still running about 2.5 Bcf/d undersupplied, and our analysis shows that this state of undersupply will persist throughout the summer. Based on the current weather outlook, we forecast a cumulative build of 142 Bcf over the next two weeks, 47 Bcf below the five-year average and 11 Bcf below last year.”

Inventories now stand at 2,369 Bcf and are 375 Bcf less than last year and 256 Bcf greater than the five-year average. In the East Region 17 Bcf was injected, and the Midwest Region saw inventories rise by 16 Bcf. Stocks in the Mountain Region were greater by 6 Bcf and the Pacific Region was up 6 Bcf. The South Central Region increased 23 Bcf.

Longer term traders see the market continuing lower before an extended advance. “I think we are going back up,” said Alan Harry, former options trader and principal with Harry’s RE Trust in New York.

He explained that “right now there are a lot of longs in the market and it’s a little early. The longs have it right that we have a supply issue in natural gas, but they are a little early. Because there are so many longs much of the public is aware of it. It’s making the market top-heavy and the fundamentals don’t support it.

“That’s why when we got to $3.40 to $3.42 it made a double top and that was it. Right now I would be buying dips. The longs are already liquidating, and the market has the fundamentals to go higher. I don’t see us going below $3.05,” Harry said.

In physical trading temperatures were forecast to drop like a rock Friday in major metropolitan markets and took many spot quotes with them. Forecaster Wunderground.com predicted the 95 Thursday high in Boston would fall to 81 Friday and 61 by Saturday, 6 degrees below normal. Philadelphia’s 93 Thursday peak was expected to drop to 89 Friday and 70 by Saturday, 4 degrees below normal. Chicago’s Thursday high of 77 was seen falling to 53 Friday before rebounding to 73 Saturday, 2 degrees above normal.

[Subscriber Notice Regarding NGI’s Market-Leading Natural Gas Price Indexes]

Gas at the Algonquin Citygate swan-dived 87 cents to $3.30 and deliveries to Iroquois Waddington gave up 3 cents to $3.20. Gas on Tennessee Zone 6 200 L skidded 48 cents to $3.19.

Farther south gas on Transco Zone 6 New York was quoted at $3.05, down 13 cents and packages delivered to Tetco M-3 Delivery shed 12 cents to $2.82.

Prices at major trading points showed more modest declines. Gas at the Chicago Citygate retreated 4 cents to $3.01 and deliveries to the Henry Hub changed hands 3 cents lower at $3.13.

Gas on El Paso Permian came in 2 cents lower at $2.67 and Kern River prices were quoted 2 cents lower at $2.74. Gas priced at the SoCal Border Average fell 2 cents to $2.80.