After rallying sharply earlier in the week, and with the market shifting its focus to the latest Energy Information Administration (EIA) storage data, natural gas futures were trading slightly lower early Thursday. The October Nymex futures contract was down 1.7 cents to $2.428/MMBtu shortly after 8:30 a.m. ET.

Ahead of this week’s EIA report, due out at 10:30 a.m. ET, estimates have been pointing to a build in the upper 70s to low 80s Bcf for the period ended Aug. 30. A Bloomberg survey on Wednesday showed a median 78 Bcf prediction, based on 10 estimates ranging from 73 Bcf to 90 Bcf. A Reuters survey also pointed to a 78 Bcf injection, with responses ranging from 67 Bcf to 90 Bcf.

Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at a build of 76 Bcf. NGI’s model landed on an 80 Bcf injection.

Last year, EIA recorded a 64 Bcf injection for the period, and the five-year average is a build of 66 Bcf.

“It was hotter than normal over the West, Texas and portions of the South and Southeast, while cooler than normal from the Midwest to the East,” NatGasWeather said of this week’s report period.

As for the overnight weather data, the forecaster viewed the models as “little changed” but noted the potential for hotter trends to develop for the second half of September.

“The southern U.S. will remain hot through next week and is where most of the nation’s cooling demand will occur due to widespread highs of upper 80s to near 100 degrees, hottest across the Southwest and Texas,” NatGasWeather said. “The Midwest to Northeast will be warmer than normal much of the next two weeks. However, this will result in lighter than normal demand when conditions would normally be getting a bit chilly at night.”

Analysts with Tudor, Pickering, Holt & Co. (TPH) described the recent gains in natural gas, including an 8.7 cent rally for the front month contract in Wednesday’s trading, as a curious case of strong technicals and weak fundamentals.

“From a fundamentals perspective, we can’t explain the current rally in the natural gas market, but it appears technicals may be partially responsible,” the TPH team said. “While we’re not technicians, those who are more honed in the practice tell us gas is testing, or breaking through, several technical indicators.

“...However, from a fundamentals perspective things are decidedly less rosy. Production continues to outperform,” liquefied natural gas feed gas demand has fallen off somewhat, and residential/commercial demand “is at its lowest level in a year.” This comes as the Sur de Texas-Tuxpan export pipeline into Mexico “is still only moving 0.7 Bcf/d. Ultimately, we’re believers in the fundamentals and expect gas will correct to the downside.”

EBW Analytics Group analysts characterized the “startling gains” recorded since late last month as a “major short squeeze.”

“A pullback is likely soon,” according to EBW. “When, however, is more difficult to judge. Further, the recent run-up is likely to reset market sentiment; even when the retreat begins, prices are likely to remain higher than previously expected.”

Meanwhile, Hurricane Dorian was bearing down on the Carolinas early Thursday, and the National Hurricane Center (NHC) was warning coastal residents to expect “life-threatening storm surge and dangerous winds.” As of 8 a.m. ET, Dorian was about 70 miles south-southeast of Charleston, SC. Maximum sustained winds were measured at 115 mph.

“Dorian is now moving toward the north-northeast near 8 mph,” NHC said. “A turn toward the northeast is anticipated by tonight, and a northeastward motion at a faster forward speed is forecast on Friday. On the forecast track, the center of Dorian will continue to move close to the coast of South Carolina today, and then move near or over the coast of North Carolina tonight and Friday.

“The center should move to the southeast of extreme southeastern New England Friday night and Saturday morning, and approach Nova Scotia later on Saturday.”

October crude oil futures were trading 9 cents higher at $56.35/bbl shortly after 8:40 a.m. ET, while October RBOB gasoline was trading close to even at $1.5336/gal.